Management Consulting for Small Businesses – Justifies Existence?
Historically management consultants are among the most hated professional community in the business world. As a student, when I aspired to be a management consultant, I wondered why glamorous management consultants always frowned about being “hated”. Once I entered the profession as a management consultant is when I truly understood how hated management consultants are.
While there are ethical and unethical people in every industry, act of a few consultants (since the emergence of management consulting) who robbed clients without delivering value can’t be rub against the entire profession of diligent value worshippers. Management consultants, over the years, have emerged to be a very important part of the entire eco-system.
Though Indian businesses are not as consulting conscious as their western counterparts, the trends to employ management consultants has begun to improve. Management consultants still get brick bats while moving in industry circles… Especially when it comes to SMEs management consultants are look at like the famous quote “don’t employ a consultant to tell you time from your watch”. Whenever I come across these people, I so pity them for the lack of knowledge and understanding of the benefits of employing management consultants.
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Few reasons where management consultants can add value. This is also an effort to imply management consultants are not just for big MNCs, SMEs and even start-ups can greatly benefit from management consultants.
- Third person perspective: Being part of the execution of any process/business etc one tends to get constrained by conventional wisdom, conditioning, experiences etc. Involving consultants as part of strategic planning etc a new perspective is brought to the table. Irrespective of the relevance of the new perspective, it is valuable for least of least the entrepreneur/team learn what is definitely not an approach.
- Strategic perspective: While firefighting at the grassroots, especially SMEs tend to lose their vision of the big picture. When a management consultant comes to the table as an external entity not involved in firefighting, that person is in a much better position to lead the entrepreneur/team to see the big picture. Several real problems can be solved at the strategic level, entrepreneurs at time just don’t look at things that way.
- Case study support: Why reinvent the wheel when someone has solved the same problem SMEs face. Management consultants can elaborately choose and supply relevant case study support corresponding to the business and circumstances. It’s the best gift a management consultant gives a client, and one of the most valuable. However fundamental, to look for precedent, many companies just don’t do it.
- Critical data analysis: Strategy in the modern world is all about interpreting statistics. Lots of information is hidden in data. Extremely objective exhaustive analysis can greatly aid the problem solving process. Management Consultants, with their third person perspective, can greatly add value by interpretation and analysis.
- Domain Expertise: Many management consultants are hired for specific domain expertise. Say for functions like finance, supply chain etc or industries like retail, pharma etc. These consultants usually bring along with them the absolute understanding of their respective domain. Domain experts are one of the most respected among the clan, I’m not sure when clients will realize consultants are not magicians. They can’t pull off a miracle off the sleeve.
Despite able to add value at the top of the pyramid, one might wonder why management consultants are as hated as they are. Its always about results when clients pay. As a consultant taking responsibility is unethical, but it very difficult to put it across to clients. No strategy, no plan, no framework can deliver results without efficient execution. As long as execution remains with the client, its unethical for consultants to take responsibility of results. The obvious question that may be raging is “why not take up execution”, but when a consultant gets involved in execution, it seizes to be consulting and all the benefits of “third person” which is by far the biggest value add is forfeited.
Despite all the glamour that surrounds management consultants, this is the ugly truth. What’s your opinion?
[Guest article by Venkata Sashank, cofounder of Dot Now Social Media Services LLP. This article is part of our series inviting entrepreneurs to contribute and win free entry tickets to Nasscom Product Conclave]
Note from Ashish – An apt post, that applies to many startups, especially when it comes to bringing Product Management/Marketing consultants vs. attempting to DIY (especially when there are signs of repeat failures).
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While the title says about management consultants (MCs) for small business, the article is about just MCs. Let us look at them from the perspective of a startup.
For a small company focussed on a particular niche domain, domain expertise is within the company. If there is no domain expertise and the only way to get that expertise is through a consultant, you have bigger problems.
As a startup founder, I am not looking for people to give me advice, but hands on the ground. Almost all MCs give advice, but have no responsibility beyond that in either implementing that advice or in its outcomes. It is the founder/CEO call to figure out how to use that advice.
Further, advice from 30,000 feet is almost useless. Thinking you can identify the curve, while in reality you are trying to figure out the market and financial model is at best a fantasy.
The best analogy I can think of is that of a small sharecropper hiring a property management guy. My current problems are on figuring out how I can survive on my tiny bit of land, what I should plant and where my next profit is going to come from. I am worried that someone will encroach and take it away when I am sleeping at night. I do not need someone to tell me what I should do when I have 10000 acres. The best person to give me advice is the neighbouring sharecropper who has gone through the grind and made it big.
Which is why I will never hire a MC for my startups.
PS: When you are a large company, the problems are different and MCs do add value. I am not saying all MCs are bad.. but about 1% of MCs understand startups and 99% of them will kill the company and there is no way to identify that 1% easily.
True. Consultants operating at a purely ‘advice’ level (the 30k feet you mention) are not something startups should go for. (There are a few exceptions where people have made good use of such insights from key, detached mentors, but thats in a very few cases.)
For most startups, such ‘consulting’ help can, however, come in roles which actually help execute while playing a strategic role – it gets tougher and tougher for people with operational responsibilities to play that role – which is the 2nd point made in the post.
The sharecropper, after all, does directly or indirectly depend on soil experts, seed experts, pest control experts, legal/community help, etc etc to get a better yield, and a fair deal! Not everything can or should be done inhouse – both for reasons of cost as well as unbiased thinking.
Essentially : establish real value, and don’t be either impressed merely by the consulting brand/tag nor be cynical/dismissive because its that! If you see how it can help – or even just free up some of your (team’s) effort and let you execute better – use it! Its dangerous to assume the consultant will replace thinking or execution, and equally dangerous to assume you’ll never need to utilize others’ expertise. Its just a skillset you’re hiring, really. Using it judiciously is the trick.
- Sameer
This is a very helpful article
A very thought provoking post! I started typing out a response and realized that it was turning into a blog post by itself, so I made it one
Please find it on our blog.
Do realize that I don’t have a whole lot of knowledge on the details of how management consulting works, beyond knowing a few consultants personally, and beyond what a layperson knows.
Hope it makes sense. I realize that my thoughts above must reflect my very rudimentary knowledge of management consulting, and I will happy to learn where I am wrong and right.
Best regards
Ravi
Ashish,
Wasn’t the contest about ‘product’ related articles or is this condition relaxed now ?
The contest was definitely about products, but it’s relaxed when entrepreneurs share insights (which was of course mentioned in a subtle way).
And the quality of discussion in this post is a reflection of that.
Cool, plan to write a couple so was checking…
One of the most prohibitive factor for having consultants is cost. Value add vs cost does not make it better proposition for start ups. One should be very clear about his expectations from these MCs.
I do not think MCs can add much value in boot strapping stages but definitely they can add value in expansion phase with their domain expertise. Definitely it shouldn’t be core domain of the company. Also if you need those skills on continous basis then it make sense to hire skills than on contract.
Value add vs cost : first establish the need for the role, the costs for hiring a full timer, the costs of a consultant, and then the positives/downsides of an “employee” vs an expert who can prove to be unbiased. If it makes sense then, go ahead. If not, give up. But not before you understand this aspect of getting skills on board.
Thanks to pluggdin for publishing my post. Thanks to one and all for reading the post.
Special thanks for those sending in valuable comments. An interesting thread is also on the same post at Ravi’s blog. Please visit that too for another perspective.
I understand Management Consultants have a very bad “brand” and the post was just about that. But all feedback is welcome. Hope to write more often on the same forum on similar subjects if the readers of this blog are interested (and i’m allowed to write!).
such a great article, and was very helpful
Thanks for sharing such an informative article with all of us. I’ve bookmarked your blog will come back for a re-read again. Keep up the very good work.