January 17, 2023

 Daniel Heymann

Consulting adding value optimisation legal operations

A consultant, as the well-known quip goes, is someone who charges you lots of money to use your watch to tell you what time it is. Cynicism aside, scepticism of the value of management consultants is widespread. The business world is rife with stories of large sums spent on consulting projects that failed to deliver a sound return. In one example, from the height of the Covid pandemic, the UK government shelled out an estimated £40m on consultants to help set up a test-and-trace structure that ultimately failed. Beyond failed projects, there are countless anecdotes of consultants labouring to produce a report that ends up locked away in a desk, gathering dust.

Yet, champions of consultants offer no shortage of case studies where consultants added tremendous value. How, then, can one know whether consultants are worth the expense?

In 2008, World Bank and Stanford University researchers set out to find answers. First, they identified several Indian textile factories that were chaotic, poorly managed, and significantly inefficient. Next, they split the factories into two groups. The factories in the first group continued to operate as usual. At the others, the researchers tasked management consultants with identifying and implementing changes to improve efficiency. The goal was more than to see if consultants made a difference; the critical question was whether the consultants were worth their fees.

In the end, the consultants delivered. At a factory in Mumbai, the consultants instituted new processes, established a systematic storage system for goods, and tracked the number and types of defects to enable further process improvements. The result was a 17% jump in productivity, which paid for the consultants’ fees several times over. The answer was clear: consultants can indeed earn their keep – and then some.

But that prompts the question, how can you identify the consultants who will add the most value?

The crucial element is the breadth of expertise. At the Mumbai factory, the consultants had the range of know-how that was necessary for taking a holistic approach. Instead of fixating on a single problem, they first got a big-picture understanding of the situation and how all the pieces fit (or did not fit!) together. They then designed a set of solutions that leveraged each other – making the whole solution more impactful than the sum of its parts.

In essence, the role of consultants is to find value in complexity. As with the Mumbai example, consultants do their best work when they bring a reliable toolkit to a problematic process which they deconstruct and rebuild with a fresh pair of eyes. In future blogs, I’ll share details of how this is done.