Consultancy is a profession in which ethical conduct, personal reputation, trust and integrity are essential to its success
Do government and companies really need or use consultants?
Governments and big companies employ executives/staff with a high degree of expertise. In fact, the reality is that in many cases, the employed executives are probably more highly qualified than the consultant is. Why then are consultants held in higher esteem than in-house employed experts and sometimes paid more than the in-house employed experts?
There are some valid reasons why companies and governments use consultants, and use them repeatedly. Some of these reasons are:
1. To help with the constant demand for capital
The need for capital is a continuous need. Every company, whether an early-stage start-up company or a successfully operating company, needs capital from time to time for business development and expansion purposes. Consequently, in the frequent situation where a company does not want to use a substantial amount of borrowed money to fund a particular expansion project, companies will hire consultants who can help them to tap into the private equity market for capital funds.
2. To Turn around companies in distress
Business failure is a natural occurrence. Company liquidation statistics has shown that there are always many businesses in trouble or distress. Statistically, majority of these troubled or distressed businesses fail. It is possible to save many from these troubled or distressed businesses, but the initiative might not come from them. If they want to save themselves, they must have a Plan B in place with a trusted consultant specialist.
3. To provide expertise or experience and special skills
Many companies find an occasional need for a person with particular skills, expertise or experience that are not held by anyone employed in the company to undertake some specific task or tasks. Alternatively, a company may just need someone to help out during a period of high activity where existing staff cannot cope with the workload volume.
4. To ensure high-level business efficiency among shareholders
Companies must operate efficiently. Inefficiency leads to higher costs, which inevitably leads to uncompetitive selling prices for the company’s products or services.
Noncompetitive selling prices mean that businesses that are more efficient will infiltrate the company’s market share, thereby devastating the company’s sales revenue. A reducing sales revenue situation must be corrected quickly or it will have fatal consequences for the business.
In these circumstances, companies will hire consultants who can look at the company from a ‘whole-of-business’ perspective in ways that are beyond the scope of existing executives. The consultant therefore can make independent recommendations to improve the company’s overall efficiency, however the company wants to define that term.
5. To create new ideas to increase sales
No business can carry on without enough sales to cover all its operating costs and make a profit. A company that needs to increase its sales relatively quickly may hire a consultant to bring in some new ideas to re-invigorate the sales effort.
6. To solve and resolve Companies conflicts
When faced with difficult or intransigent internal management problems, a company will sometimes need an independent or neutral person to objectively review its internal management or functional operations in specific areas and make recommendations for improvement.
7. To bring in new ideas to keep ahead of their competitors
Sometimes a company will face an apparently complicated or unusual problem for which a solution seems difficult. Senior management may feel that employees are too close to the problem to be objective in recommending solutions. Consequently, the company will bring in an external consultant with problem-solving skills to provide a fresh approach to solving the problem.
From senior management’s point of view, there are distinct advantages in a ‘neutral’ consultant dealing with the problem because of the consultant’s impartiality. Moreover, the consultant will not have any conflict of interest in recommending possible options to resolve the difficulty. This is actually the traditional consulting assignment situation.
8. To ensure honest and healthy company politics
It is not unknown or unexpected that sometimes internal competitive pressures between senior executives, or company working divisions, can have an adverse effect on problem solving, particularly where solutions may have an unfavourable effect on particular executives or company divisions.
So, it is not beyond comprehension to understand that the solution to a specific problem may be readily identifiable, but for sensitivity reasons, those who understand the problem cannot present the solution, let alone implement the solution.
The appointment of an independent or neutral consultant to review the problem, make recommendations and implement a solution can take the heat out of the matter. In such a sensitive situation, the consultant, who is an unbiased, impartial and disinterested participant in the resolution process, will not be influenced by company politics in reaching a solution to the problem. This is another form of the traditional consulting assignment situation.
9. To ensure compliance with government regulatory laws
Companies can be subject to fines and company executives can be subject to fines and imprisonment if government regulations are broken. There is no exception, there is no escape: all companies are subject to government regulations.
These regulations cover every aspect of business: financial reporting, fiduciary responsibility, taxation, capital raising, trade practices, consumer protection, industrial relations, environmental protection, you name it; it’s there, and its covered by government regulations.
It is simply impossible for a company officer today to have complete knowledge of all applicable government regulations. Consequently, companies hire consultants with expertise in particular areas of government regulation to review specific areas of their operations to ensure regulatory compliance.
10. To properly coach staff
Business today operates in a very competitive commercial environment that is becoming more and more complex. There is therefore a continuing requirement to educate staff at all levels to be effective. The business reality is that those companies whose staff cannot contribute effectively in today’s very competitive commercial environment are doomed to failure.