Why Hire a Consultant?

Thumbs up manThere are many good reasons to hire a consultant. Just a few of them are listed below and any one reason may be enough for you to realize the value of a consultant in your business. However, the real impact of hiring a consultant comes from leveraging a combination of these values.

 

1. Accountability and Motivation

Consultants are inherently accountable. Consultants are generally paid for specific work in a specified timeframe under a verbal or written agreement. Additionally, consultants want your recommendation and follow-on work, making them very motivated for your cause. Full-time employees are often less motivated to get the job done.

 

2. Prior Experience

You hire a consultant that has already done the kind of work you need completed, so there is little or no training necessary. Additionally, consultants not only tend to have direct experience in many markets, industries or circumstances, but they also tend to be the most adaptable and quick-learning resources that you can hire.

 

3. Try Before You Buy

Consultants allow you to “try before you buy.” Often you can engage a consultant on a small project before contracting them for larger projects or even long-term engagement. This reduces your financial risk in spending for a consultant who does not meet your needs, and it also enables you to quickly develop your project.

 

4. Work As Needed

Many consultants will work with a flexible level of commitment, working hourly, on a project basis, or under a long-term agreement. This flexibility allows you to appropriately plan your budget and keeps you from overspending on full-time employee overhead or worse yet, having to lay off full-time employees.

 

5. Anonymity

Consultants may allow you to accomplish efforts without exposing your intellectual property or strategy. Consultants can perform work, subject to regulations and business ethics, under their own organization name, keeping your company goals confidential.

 

6. Broad-based Creativity

Consultants can leverage, but are not limited by, your company’s culture or business processes. Additionally, consultants leverage the insight and knowledge gained from other experiences to create the solution or plan that will offer the highest return for your organization.

 

7. Cost-effectiveness

Consultants are cost-effective. Full-time employees require a significant overhead expense in addition to their salary. Overhead is often 50% to 100% of salary to cover health benefits, 401k matching, vacation and sick time, computer and other physical resources and more. Consultants incur none of these expenses, so while consultant fees may appear high at first look, they really are not. Additionally, you generally hire a consultant for a specific budgeted amount meaning that there is no waste. Full-time employees, on the other hand, are a constant expense (directly and in overhead) regardless of their work output.

 

8. Gain Expertise

Some tasks, because they occur so infrequently, call for special skills that cannot be learned quickly or easily by full-time employees. This is the foundational value of a consultant, allowing your company to gain the consultant’s expertise without having to make a full-time hire.

 

9. Objectivity

Many projects and strategies within an organization have proponents and detractors whose objectives may be biased by personal goals, office politics or business practice preferences. A consultant may be able to find a "win-win" solution and can often be accepted by various parties as an objective mediator in these differences of opinion. More importantly, a consultant can look at the situation completely objectively without regard for any internal preferences.

 

10. Credibility

The expert status of a professional consultant adds credibility to their work and interactions. Companies can leverage this credibility when using a consultant to represent them to other companies or industry organizations as well as internally, rallying the staff around goals and processes that are developed under the consultant’s expertise.

 

11. Skill Variety

Companies, especially start ups and small companies with limited budget and staff, can hire a consultant who has many skills from years of varying experiences and who has a network of colleagues and resources through which more skills can be accessed. It would be difficult or impossible to hire enough full- or part-time staff, and to keep them fruitfully engaged, as opposed to hiring a quality consultant with a variety of skills.

Compounding Consultant Value

The best value in hiring a consultant, perhaps even the necessity to hire a consultant, exists when multiples of these reasons apply to your company’s needs. This multiple value proposition is shown in the figure for technology consulting scenario examples covering due diligence on a company for potential investors, a technology-driven start up, and a growth company struggling to keep up with their own success in a burgeoning market. (Note that the relative height of the due diligence scenario to the others is not indicative of lesser value. The graphs indicate a subjective score in each consultant value of 1 to 10 and any compounding of values indicates significant value-add as any one value may be sufficient reason to hire a consultant.)

Consulting for Investor Due Diligence

The leftmost column of the figure represents a scenario in which an investor, be it an angel investor, venture capital firm or a private equity holding company, is seeking to complete technical due diligence on a company. This scenario may represent due diligence on a brand new technology at a start up company with which the investor has no expertise, or it may simply be that the investor has more viable opportunities than the firm can handle and more help is needed in the due diligence process. By reviewing the graph the need unfolds as an experienced professional who will provide high quality, cost effective and objective due diligence on a timetable that suits the investor. A good consultant should also be adding skill variety and creativity to the exercise which helps to ensure completeness and adds to the credibility of the work to external reviewers.

 Investor Due Diligence Consultant Value  Start Up Consultant Value  Growth Company Consultant Value

Investor Due Diligence

Start Up

Growth Company

Compounded Consultant Value for Several Technology Company Scenarios

Consulting for a Technical Start Up

The middle column of the figure represents a scenario in which a technology start up, perhaps headed by experienced engineers or inexperienced entrepreneurs, finds that they lack the strategy, marketing, or business development experience to turn their idea or technology into a scalable, repeatable, business. Perhaps they were told by a potential investor that they needed to fill out their team to be credibly positioned for funding. In any of these cases, a technology consultant can bring the expertise, experience, availability, and skills needed to help them drive their business. Hiring a consultant in this situation allows the entrepreneur to assess the consultant’s skill under a focused agreement for the appropriate duration to achieve their goals and to consider the consultant for a long-term position if desired. As with other consulting scenarios, a good consultant will also add a dose of objectivity to the hiring entrepreneur’s work and exercise creativity which may enhance the ideas or offering of the start up.

Consulting for a Growth Company

Consulting for a growth company is perhaps the most classic example of compounded consulting benefits. The rightmost column of the figure represents a scenario in which a rapidly growing technology company has a consulting need. The company may be outperforming the market (gaining share) or the market may be expanding rapidly, demonstrating the old adage that “a rising tide raises all boats,” or both. These growth companies need the skills and expertise of a consultant with the commitment of a full-time employee; who is available on short notice and very motivated, who is credible in the market and to company staff, and who is willing to work within a time frame that is dictated by the fast moving market. Additionally, because of the likelihood of substantial competition to the growth company, the relative anonymity that hiring a consultant can ethically bring can be a significant plus in hiring a consultant.

What are the Concerns in Hiring a Consultant?

There are some concerns that are sometimes expressed about hiring a consultant. The short response to any of these concerns is that they actually apply to any hiring situation: full-time, part-time or consulting. In that sense, they are really issues of a company performing their own due diligence and needs review when considering the use of a consultant.

Paying for a Consultant

Start ups, in particular, may be concerned about paying for a consultant. The same concern should apply regarding any type of hiring decision. If companies have not budgeted for a consultant, the consulting fee may “feel” higher than it really is, despite the value. While long-range strategy and planning can highlight the need for budgeting for consulting services, there may be other ways to compensate consultants. Consultants may take a reduced cash payment for equity (stock) in a company. Some consultants may work on a contingency or commission basis. Whatever your need may be, many consultants, by the very nature of their business, are creative in finding solutions to solve problems, including how they are compensated for helping your business.

Consultant Confidentiality

Consultants make their living by maintaining client confidentiality even amongst competing clients. Every consultant knows that they will lose credibility if they betray confidentiality, and they may even become liable for damages. Because of this “every day” recognition, professional consultants are unlikely to mismanage your company’s confidential materials. Full-time employees are far more likely to share information with a new employer and to take and use company confidential information.

Great Ideas, No Execution

Classic management consulting is often faulted with swooping into an organization, running roughshod over the staff, presenting their findings and recommendations to management and then disappearing when it comes to implementation and further actions. Just as in hiring executive management into a company, understanding what you are getting for your consulting dollar is part of the hiring process. For due diligence, start up, and many other consulting scenarios you want to have a consultant that can execute as well as analyze and strategize.

Consulting for Start Ups

Start ups sometimes have to deal with investor concerns that their business may not be viable or well managed without the consultant that has supported them. As with any employee or hired hand, the reality of this concern lies in the structure of the engagement. For example, this concern can be mitigated by hiring the consultant long-term or bringing the consultant on as a member of the advisory board. Alternatively, the consultant’s work can be codified into the business through processes and data management, enabling a full-time employee to take over the work with little or no continuing consulting.

Conclusion

Consultants can be valuable assets to any company and fill a much needed void in the hiring landscape for available, cost-efficient expertise. Consultants are often considered for only one aspect of the value that they bring to a company but consultant value is greatly compounded when the many benefits that consulting offers are considered. Finally, the concerns that are generally raised about consultants are really the same concerns that must be faced when making any hire, full-time or part-time, and all concerns have mitigation strategies to enable positive outcomes.

 

 

A PDF version of this article can be downloaded on the Jordan Ridge LLC Resources page.

You may also be interested in When to Hire a Consultant.

 

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