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relationships with the best consultants in their fields. Consultants have a
bad reputation among some owners and managers for two basic reasons:

1. There are many bad ones.

2. Many clients use consultants badly.


HIRING QUALITY CONSULTING HELP

In the 1980s, the number of business consultants, especially financial con-
sultants, grew substantially. There are many business experts happy to
work with small, growing companies. However, as a potential buyer, you
should beware. Not every consultant is a McKinsey Co. or Tom Peters.

Erratic use makes problems of erratic quality worse. Often, the owners
and managers who complain most about consultants use them in the
most ill-advised ways. Horror stories usually include some variation on
this theme: A manager knows someone or meets someone whose ideas
and expertise impress people (primarily, the manager himself or her-
self). The someone may be a consultant or may become available because
of a career change. The manager likes the someone™s ideas or energy or
charisma but doesn™t have a suitable job available, so the manager hires
the someone as a consultant on some nonspecific basis such as “improv-
ing performance.” A scenario like this is destined for trouble.

If you want people with good ideas and energy and charisma around you,
hire them as employees. Save consultants for more specific goals.


Finding the Right Consultant

Most consultants market their services by word of mouth. As a result,
when owners or managers think they need someone, they usually do
242 Lead with Courage



best to ask friends or peers for names, but recommendations don™t en-
sure success. The key to success lies in interviewing consultants well and
being very specific about your needs, expectations, and budget.

The following questions and answer guidelines can help you interview
prospective consultants and choose the right one for a given time and
circumstance.



Ten Questions You Should Ask before Hiring a Consultant

1. Most consultants focus on two areas: cutting costs and raising revenues.
What do you see as the relationship between the two functions? Which do you do
better?
Cost cutting is the consultant™s usual expertise. It™s what most com-
panies need. The main reason for corporate restructuring is to reduce
costs. Many hire outside consultants to take an objective look at organi-
zational charts, value-adding processes, and competitive environments.
“We spend a lot of time talking to a company™s customers, so we under-
stand what they like and don™t like,” one consultant says. “What does the
customer value? Is it time? Is it quality? We define that.” This means that
a company can cut jobs and still not touch on one nonvalue-added activ-
ity or add value to the customer.

2. What was your professional experience before you became a consultant?
Ultimately, you should want any consultant you use to have a strong
bottom-line sensibility. You want this person”or team”to focus on the
things that will add the greatest amount of value to your company in the
shortest amount of time. This kind of thinking doesn™t come naturally
to many people. It usually demands two kinds of experience: as a chief
executive officer or as a corporate-turnaround specialist. A consultant
who has this kind of experience has dealt with strict cost controls, high-
pressure scrutiny, and the need for quick results. These are the same
traits you should look for in anyone giving you expert advice. Though it
may seem counterintuitive, you might look for bankruptcy and similar
workout experience from a consultant. The urgency learned in that envi-
ronment applies well to the urgencies of daily business life.

3. How many professionals work with you or at your firm?
Business consultants fall essentially into two categories: solo practition-
ers and team players. The differences between the two usually involve
the type of work they take. Most of the time, the soloists deal with less
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Leading Your Business for Maximum Results



specific, strategic, or vision-related issues; the teams get into more
tightly focused number crunching. Less specific functions tend to take
less time (sometimes as little as one day); the more specific take more.

One of these functions isn™t better or worse than the other. The trap to
beware is the marketing soloist who claims he or she can also review all
of your accounting. The exercises in this book will help you make your
financial statements easier to understand, but don™t expect one consul-
tant to fix all your problems.

4. Will you sign a letter of confidentiality? Will you refrain from working for
our competitors?
Some owners and managers assume that short-term strategic consultants
pose less of a threat to proprietary interests than the number crunchers.
However, you and your staff should feel free to discuss any business sub-
ject with your consultant and trust his or her discretion. If you feel un-
comfortable, you won™t discuss things candidly. The solution is to ask all
consultants to sign a letter of confidentiality.
Your risk in these cases isn™t usually that the consultant will knowingly
steal proprietary information or material. Most are professional enough
and work in small enough markets that reputations matter. More often,
the risk involves a consultant™s unwittingly mentioning something. If the
consultant has signed a confidentiality letter, he or she will be more
likely to think twice.

5. Who are some of your other clients? Who are some people and companies with
whom you™ve worked before? May I call them to ask about your work?
Don™t be wowed by big-shot former clients. At big companies, consul-
tants are hired in teams to tackle extremely specific projects. Just be-
cause the person in the expensive suit claims Chrysler as a former client
doesn™t mean he knows Lee Iacocca on a first-name basis. In fact, it™s bet-
ter if the consultant has worked with companies closer to your size and
shape because he or she will more likely understand your needs.

6. With how many clients do you work at one time? Do you have enough time to
devote to our company to accomplish our goals? Will you return phone calls or
e-mails the same day?
Asking other or former clients about the consultant™s responsiveness and
attentiveness can be helpful, as can asking more pointed questions of the
consultant. The questions all focus on the same point: How much atten-
tion can the consultant afford to spend on your needs? The number of
clients a consultant can serve well varies with the kind of service pro-
vided and client involved, but some general rules apply: You want to
244 Lead with Courage



have same-day response to questions or problems. If you™re undertaking
a major restructuring, you probably don™t want your consultant working
with more than two or three other clients. One caveat is that some own-
ers and managers who™ve had bad experiences with overly invasive (and
expensive) consultants warn that you shouldn™t be the only client a con-
sultant has.

7. Will you teach us to do this work for ourselves and become self-sufficient?
How long will this take?
One common trap in using a consultant is becoming dependent on him or
her. From the consultant™s perspective, this may simply be good busi-
ness, ensuring future work. From your perspective, it may be little better
than the status you had before you had the consultant come in. By mak-
ing training part of the consultant™s job, you can limit the chances of a
prolonged engagement. Establish a schedule within which the consultant
can accomplish his or her goals. Assign a staff person to work closely in
this process and learn everything he or she can.

8. Have you written anything”published or not”that deals with issues such as
the ones this company faces?
Consultants love to write about their experiences and their theories. If
so, it can help you understand how the consultant sees markets and busi-
ness factors that may affect you. Management or technical literature can
be a good place to look for consultants. Although the latest management
guru writing for the Harvard Business Review may be beyond your needs
and means, you might be able to find useful experts in trade or regional
newspapers and journals.

9. How do you charge for services? Do your fees include travel time and other
miscellaneous charges or are those billed separately?
There™s no set standard for paying consultants: Some work on a straight-
fee basis, others work for a fee plus performance bonus, and a few work
on a contingency basis”tied to sales increases or cost reductions. As
with paying any outside contractor, your concerns should be ensuring a
high quality of work and containing costs within a predetermined
budget. With consultants, focusing their use as specifically as possible
will help accomplish both of these ends.
In addition, make it clear from the beginning what incidental expenses
you™re willing to pay and how you™ll pay them. Consultants who™ve
worked at or for large corporations may be accustomed to expense ac-
counts that you aren™t. Be very clear about how much you™re willing to
spend on the whole project or series of projects. Insist that the consultant
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Leading Your Business for Maximum Results



warn you”in writing”if the project won™t be completed on time and
within budget.

10. What kind of documentation will you give us when the project is completed?
Who will own that documentation?
Keeping a paper trail of the work a consultant does for you accomplishes
several ends”all good. First, if the consultation has worked well, this
will usually give you some forms and tools to use to improve some part
of your performance.
Second, it allows you to keep a record of the analyses made of your com-
pany and the responses you™ve taken. This kind of “scrapbook” can be a
big help when dealing with future problems or other consultants. Fi-
nally, keeping a paper trail makes clear what the consultant did”and
didn™t do”while working for you. If any disputes should emerge over
payment, ownership, or confidentiality, you™ll have some support.
In general, all of the work (including spreadsheets, working papers,
plans, or literature) a consultant does for you is your property. Some-
times”especially in the cases of innovations and literature”this be-
comes an issue. Make it clear from the beginning that you want to own
everything that comes from the consultation.


Establishing a Successful Relationship

Talk to as many consultants as you can before hiring one. Even if you
have one person or firm in mind, interview at least a few others as a sort
of due diligence. You™ll probably find that each interview helps you focus
on the issues you™re hiring a consultant to help resolve.

Conduct the interviews in a comfortable place. In some cases, this might
mean a neutral location and setting”over lunch or in some kind of recre-
ational setting. Being away from the office sometimes helps people think
about problems in more objective terms.

When you™ve found a consultant who seems promising, use the inter-
view to test his or her response to one or two of the real problems you™re
facing. You don™t have to recreate every detail of your problem; boil it
down to its essential elements and pose it as a sample of the kind of work
you™re anticipating.

This kind of question works on two levels. First, it gives you a sense of
how the consultant works in a short amount of time with rudimentary
246 Lead with Courage



information. Second, it lets you know what kind of response the consul-
tant gives. You can judge these things on a personal level as well as a pro-
fessional level. Ask yourself if this is the kind of person with whom
you™d feel comfortable working. Does the consultant respond quickly
enough? Does he or she think carefully enough? Is he or she too re-
served? Too extreme?

Working intensely with an outside critic and analyst of your company
requires a certain level of personal affinity”at least some similarity in
style. Although you don™t have to (and probably shouldn™t) have a per-
sonal relationship with a consultant, you shouldn™t underestimate the
importance of professional compatibility.

A good consultant will relate to your company and your goals and make
immediate contributions. Sometimes the best work a consultant does
comes when he or she is new to your company.

Interviewing consultants carefully also helps you avoid wasting their
time”and your own”later on. Using a consultant effectively and well
depends to a significant degree on how you set the relationship up ini-
tially. The following steps explain this process more succinctly.



Do Your Homework before the Consultant Comes In

Too many owners and managers hire a consultant and then stop think-
ing. They present a list of general problems and expect the expert to con-
jure dramatic results. This approach almost always ends in frustration
and many, many billable hours.

Instead, you have to take the initiative. Discuss your needs, problems,
and parameters in candid terms from the start. Set a budget or schedule
upfront for each project a consultant tackles. Save your skepticism (or
your staff™s) for the interview process; once you™ve chosen a consultant,
give him or her everything you™ve got.



Know What You Need from the Consultant

One of the biggest cost drivers in hiring outside expertise is bringing peo-
ple up to date on your company™s operations. It™s a cost driver that you can
control, though. However, it™s important for the consultant to stay away
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Leading Your Business for Maximum Results



from data gathering and other basic reporting functions; keep the consul-
tant focused on analysis. You can tabulate numbers yourself; you™ve hired
the expert to help you move forward from there. If you™re able to keep
records over even a short period of time, you can hand the consultant your
paper trail and ask him or her to read the performance numbers directly.
The worksheets in this book are designed to serve that purpose.

Another point to consider is that many consultants have a steep sort of
half life as to enthusiasm for a project. In other words, their best thoughts
and greatest creativity come early in their relationships with clients.
Being prepared from the start allows you to take full advantage of short
attention spans.

When you hire consultants, keep in mind that their most important skill
should be critical analysis and problem solving.

Give consultants specific goals. Don™t just say you have problems. In
short, know what you need, whether it™s a temporary executive, an out-
side thinker to help jump-start your ideas, or an arbitrator for internal
disputes.

In addition, to the extent you use consultants as managers, try to limit
them to so-called “bridge management” functions. Bridge management
simply means an outside consultant will oversee a business function
between permanent managers or during periods of particular turmoil.

The following are reasons that owners and managers hire bridge
managers:

• They need someone to handle excess workloads caused by proj-
ects or increased business.

• They need someone to bridge the gaps left when downsizing
takes place.

• They want to test the need for a position or the person being con-
sidered for hire.

• They want someone to handle specific short-term tasks that call
for experience and objectivity.

Make sure to give bridge managers clear instructions and schedules for
the work they will do.
248 Lead with Courage



Have Deadlines

You should also give them short deadlines or even a series of short dead-
lines instead of open-ended ones. Consultants may serve operational
functions for set periods of time, but they shouldn™t manage in the broad
sense of that word.


Like any outside contractor or vendor, consultant services are a commod-
ity”and consultants want to sell as much of this commodity over as long
a time as they can. That™s their understandable inclination as business
people. However, it™s your understandable inclination as an owner or
manager to minimize the amount you pay them.


The consultant may be right to say there aren™t quick fixes to serious
problems, but don™t let that lead to open-ended engagements. Most con-
sultants agree that restructuring involves two phases: a design phase, in
which new ways of doing work are fashioned, and an implementation
phase, in which the new ways of doing work actually are put in place.
Have the consultant schedule these phases. This helps set up an exit
strategy for the consultant, which is an important cost control tool. In ad-
dition, the consultant will see the project as a limited engagement, rather
than open ended.



Keep the Hierarchy Clear

Have the consultant report to the fewest people possible”one, if that can
be arranged. As we™ve discussed elsewhere, the best way to do this is to
keep the agenda simple and clear. When you hire a consultant, write a
short memo that tells the relevant people in your company who this per-
son is and why you™ve hired him or her. Also specify where and how the
consultant fits into the organizational chart. Avoid confusion of author-
ity and responsibility.

A consultant who worked as a bridge manager for a North Carolina bank
in the early 1990s found that two factors ensured success. First, the sen-
ior manager made sure that everyone affected was informed of her ar-
rival and her background, which gave her instant credibility. Second, the
terms of her appointment were clearly spelled out. “I had a contract, and
I treated the job as if it were my own, but I clearly knew that this was
only for a certain period,” she says.
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Leading Your Business for Maximum Results



Keep the Consultant Focused on Value-Added Functions

Make sure the consultant has both a vision for how to improve your com-
pany and a clear sense of concrete ways to help your company. The consul-
tant™s image of operational perfection may sound great in a management
journal, but it may do little in the marketplace. For example, consultants
often focus on staffing and personnel issues as a means of increasing ef-
ficiency. However, that™s not always the best approach to take. If your
product costs $10 to produce with labor costs of $1 and you cut out half
the labor cost (a major achievement), you™ve still reduced your cost by
only 5 percent. If the retail price of your product is $20, you™ve cut only
2.5 percent. The consultant will boast that he or she has cut labor costs in
half”but the retail customer won™t be so impressed by this discount.
Ultimately, processes that don™t add value to the customer erode a com-
pany™s competitiveness.



Set Regular Meetings

Set regular times to meet (weekly or monthly) when the consultant will
review conclusions, answer questions, and challenge you on better ways
to run your business.

Make sure these are working meetings. Avoid meetings that turn into ad-
ministrative updates. By meeting with the consultant regularly, you can
compartmentalize”and better control”the amount of time you spend
with him or her. It also forces the consultant to be succinct and not draw
on too much of your time. In this context, you can expect more from a
consultant than from an employee. The consultant™s attention should
focus squarely on problems you™re paying him or her to consider, not on
operational details.

This approach may not be practical in the midst of an intense project, but
it will be a good way to use the consultant before and after that intensity.
(Also bear in mind that not all consulting relationships have to be in-
tense at any point in their duration.)


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