3. Table of Contents
Internal Consultants provide objective, cost effective solutions…………………………………..
2
Internal Consultants keep confidences…………………………………………………………….
3
Internal Consultants do not rely on the latest fads………………………………………………...4
Internal Consultants do not deliver empty promises………………………………………………
5
Introduction
Establish the relationship, find or concoct problems, extend the engagement as long as possible,
maximize fees, and move on when the well runs dry.
Isn’t that the way things often seem to go when you engage external management consultants?
While there are certainly ethical and effective external consultants in every industry, external
management consulting firms have often been accused of unethical practices. Hiring managers
should be aware of the potential pitfalls of consulting that could cost a company millions of
dollars before considering engaging the services of external consultants.
This report seeks to describe the conditions that hiring managers may encounter when dealing
with external management consultants and to identify the benefits of using qualified internal
consultants instead. Internal consultants provide objective, cost effective solutions; keep
confidences; do not rely on the latest fads; and deliver what is promised.
Management consulting firms serve multiple clients concurrently. While a client would like to
believe that his company always receives the highest priority, the most talented and experienced
consultants, and the best consulting rates available, there are strong forces at work in preventing
this from happening regularly and dependably.
Some experts accuse consulting firms of being not much more than glorified “temporary
workers” whose goals are to stay at the best hotels, eat at the best restaurants, and to charge the
client the most fees conceivable. It’s been said that the availability of this temporary manpower
may be the most important factor in driving sales for consulting firms.
Question 1: How much more are you spending on external consultants
because you’re not employing an internal consultant?
In his book, Consulting Demons: Inside the Unscrupulous World of Global Corporate
Consulting, Lewis Pinault, describes being part of an early '90s consulting team assigned to
Philips Electronics. The company was fearful that Japanese competition would wipe out its
3 Ken Hicks - kmhicks@msn.com - (714) 670-2711
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4. consumer-electronics business, just as the Japanese had done with RCA and Zenith in America.
The consultant's fee for the first year of the five-year project was $20 million. Yet, says Pinault,
even if the consulting firm had assigned all its most senior officers to the project at the highest
possible billing rates, they could not have justified fees of half that amount. Never mind that
Pinault felt that Philips could exhaust his knowledge of the industry within a week.1
Contracted rates can often be in the range of $200 to $350 per hour or more and the rates are the
same astronomical amount whether the consultant is attending a meeting, gathering information,
or writing a report. If overtime is paid, the expense is beyond imagination.
Clients can ask to review the resumes and qualifications of the consultants who will be assigned
to the project prior to its initiation; however, the identification of the specific consultants that
will work on the project is very seldom an integral part of the contract. Some clients have felt
victimized and considered situations such as this “bait and switch” tactics.
Many companies find that once an external management consultant makes a recommendation,
they still need an internal resource to implement the project. If an external consultant were to
implement the project, the costs would be tremendous and the consultant has little or no vested
interest in the success of the project due to the short-term nature of consulting agreements.
Benefit 1: Experienced internal consultants provide an objective, cost-effective way to
contribute process improvement solutions to companies. They focus on a manageable
number of clients and projects with the advantage of being able to heavily invest time in
the client’s interest, rather than those of the management consulting firm. Internal
consultants have better awareness and ability to deal with environmental issues such as
politics, cross-functional impact, and budget and resource limitations.
Question 2: Is your confidential corporate information being kept private?
You don’t know your consultants the same way that you know your employees. Employees have
a vested interest in maintaining high ethical standards, integrity, and in keeping confidences that
perhaps may not be shared by all of your external consultants.
In fact, the situation might be worse that you could have imagined. Can you envision a situation
where a consultant that you have barely met has access to valuable inside information that if
exposed to your competitors could cause irreparable, and perhaps catastrophic, damage to your
company and its reputation?
What if your trade secrets are used as a benchmarking approach to analyzing your competitor’s
operations? Couldn’t an unethical person easily divulge what made your process improvement
project a success to underscore the salability of management consulting services to another of
their potential clients – and perhaps your competitor?
Or suppose that an unscrupulous management consultant approaches your competitor with an
invitation for them to participate in an “industry study” that in reality is a sales tool for the
consultant to drum up new business.
Ken Hicks - kmhicks@msn.com - (714) 670-2711
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5. Although professionals such as attorneys, auditors, and financial managers are heavily regulated
and monitored, the same is not true of management consultants. They may have little or no
accountability for their actions.
Benefit 2: Trustworthy internal consultants have access to confidential, business critical
information and adhere to the highest ethical standards, operate with integrity at all times,
and keep confidences.
Question 3: Does your external management consultant rely on the latest fad
rather than adequately addressing your specific need?
Taco Bell’s Disappointing Experiment with Self-Management:
During the early 1990’s, Taco Bell's management wanted to open thousands of new restaurants
and kiosks at various locations. However, there was a shortage of qualified managers. Taco Bell,
working with external consultants from a well-known, major consulting firm, decided to create
fewer, higher-paying management positions. In addition, the external consultants proposed
training thousands of entry-level workers to manage themselves.
The idea was that Taco Bell would then be able to assign one manager to several stores and
increase the span of control for area managers from about ten units to several times that amount.
Under the "self-management" initiative, employees were trained and provided technology to hire,
train, and supervise workers; manage store inventory; and deal with personnel problems
themselves under supervision of a "floating" manager responsible for several locations.
Management received above-market pay, partially in performance incentives 2
The self-management management fad proved to be a disappointment because Taco Bell lacked
the ability to create a platform to deliver and sustain the self-management concept. The change
from the traditional system of management control to self-management required a higher amount
of communication and effort than anticipated. This demonstrates that one solution is not always
appropriate for all companies.
Benefit 3: Internal consultants typically do not face intense pressure to propose and
implement “leading edge” solutions, which may be untested, unproven, or inappropriate to
a company’s particular situation. Instead, they can implement new concepts as an industry
follower rather than taking on the riskier and more uncertain role of technology or process
innovator. Internal consultants can often implement smaller proof-of-concept studies or
pilot projects quicker, easier, and less expensively than external consultants.
Question 4: Does your external management consultant deliver only empty
promises?
Ken Hicks - kmhicks@msn.com - (714) 670-2711
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6. Many unsuccessful engagements begin to unwind when the external management consultant
overcommits. They sometimes do not estimate or allow sufficient time for the engagement to be
properly completed, or the firm does not possess the manpower or expertise that is truly needed.
This overcommitment can easily happen when the partners and senior managers act as
specialized sales people and they are far removed from the day-to-day activities needed to
support the engagement. The sales team may not have the necessary knowledge of worker
availability, skill sets, experience, and commitments on other projects to honestly and accurately
deliver what they propose.
Benefit 4: Internal consultants provide realistic and thorough assessments of project scope,
schedule, and resource availability and expertise prior to starting a new project. They
provide a regular, periodic reassessment of performance to plan and they tell management
the whole truth when project plans need to be revised.
About the Author
Ken Hicks is an award-winning internal management consultant. Since 1982, he has used
industrial engineering and process improvement techniques to help companies ranging from a
200-person start-up energy services provider to a major mortgage lending company that
originated over $60 billion in loans annually.
Ken has advised clients including Rockwell International, Home Savings of America, Edison
Enterprises, the First American Corporation, Toyota Motor Sales USA, Commerce Energy
Group, and New Century Mortgage Corporation.
He created process improvement training programs, instructed nearly one hundred people, and
lead teams to identify innovative ways to increase revenues, introduce new products and
processes, reduce operating costs, improve productivity, reduce employee turnover, and mitigate
risk.
Ken has analyzed and improved functions including accounts receivable, accounts payable, call
centers, procurement, sales, back-office processing, human resources, labor scheduling,
collections, sales commissions, customer service, information technology, operations, facilities,
manufacturing, compliance, and test.
Following his Bachelor of Arts degree in Business Administration from California State
University, Fullerton, Ken earned a Master of Business Administration degree from the
University of La Verne located in La Verne, California.
Ken lives with his family in Buena Park, California.
Ken Hicks - kmhicks@msn.com - (714) 670-2711
6 http://www.linkedin.com/in/kenhicks
