Article Summary:Ten critical questions to ask before hiring a consultant.
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 consult to help resolve.
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 companies need. Most of these hired outside consultants to take an objective look at organizational charts, value-adding processes and competitive environments. "We spend a lot of time talking to a company's customers, so we understand what they like and don't like," one consultant says. "What does the customer value? Is it time? Is it quality? We define that." What this means is that a company can cut jobs and still not touch on one non-value-added activity 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.
3. How many professionals work with you or at your firm?
Business consultants fall essentially into two categories: Solo-practitioners 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-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: The marketing soloist who claims he or she can also review all of your accounting.
4. Will you sign a letter of confidentiality? Will you refrain from working for our competitors?
Ask all consultants to sign a letter of confidentiality. Some owners and managers assume that short-term strategic consultants pose less of a threat to proprietary interests than the number crunchers. Don't make that assumption. You and your staff should feel free to discuss any business subject with your consultant and trust his or her discretion. If you feel uncomfortable, you won't discuss things candidly. Your risk in these cases isn't usually that the consultant will knowingly steal proprietary in formation or material. Most are professional enough-and work in small enough markets-that reputations matter. More often, the risk involves a consultant unwittingly mentioning something. If he or she 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? Can I call them to ask about your work?
Don't be wowed by big-shot former clients. At big companies, consultants are hired in teams to tackle extremely specific projects. Just because the person in the expensive suit claims Microsoft as a former client doesn't mean he knows Bill Gates on a first-name basis. In fact, it's better if the consultant has worked with companies closer to your size and shape. They'll 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 emails the same day?
Asking other or former clients about the consultant's responsiveness and attentiveness can be helpful. As can more pointed questions of the consultant. These questions all focus on the same point: How much attention can the consultant afford to spend on your needs? The number of clients a consultant can serve well varies with the kind of service provided and client involved. But some general rules apply: You want to 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. A caveat: Some owners and managers who've had bad experiences with overly invasive (and expensive) consultants warn that you shouldn't be the only client a consultant 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 business assuring future work for himself, herself or themselves. From your perspective, it may be little better than the status you had before you had the consultant come in.
By making 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 like the ones this company faces?
Consultants love to write about their experiences and their theories. Sometimes this can be pretty rough reading, but it will usually help you understand how the consultant sees markets and business factors that may affect you. Also, management or technical literature can be a good place to look for consultants. While 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, a few work on a contingency basis- tied to sales increases or cost reductions. As with paying any outside contractor, your concerns should be assuring a high quality of work and containing costs within a predetermined bud get. With consultants, focusing their use as specifically as possible will help accomplish both of these ends. Also, 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 used to expense accounts 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 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 of them good. First, if the consultation has worked well, this will usually give you some forms and tools that you can use to improve some part of your performance. Second, it allows you to keep a record of the analyses made of your company and the responses you've taken. This kind of "scrap book" can be a big help when dealing with future problems or other consultants. Third, it makes clear what the consultant did-and didn't do-while working for you. If any disputes should emerge over payment or ownership or confidentiality, you'll have some support. In general, all work (including spreadsheets, computer programs, mechanical devices or literature) a consultant does for you is your property. Sometimes-especially in the cases of devices and literature-this becomes an issue. Make it clear from the beginning that you want to own everything that comes from the consultation
Jan B. King is the former President & CEO of Merritt Publishing, a top 50 woman-owned and run business in Los Angeles and the author of Business Plans to Game Plans: A Practical System for Turning Strategies into Action (John Wiley & Sons, 2004). She has helped hundreds of businesses with her book and her ebooks, The Do-It-Yourself Business Plan Workbook, and The Do-It-Yourself Game Plan Workbook. See www.janbking.com for more information.