By eliminating conflict of interest, you can reduce the cost and increase the value delivered through change programmes by over 25%.
At a recent meeting with a prospective client, the conversation turned to possible models for setting up a large change programme. The client was considering the merits of in-house staff versus giving the work, in its entirety, to one of the “Top 5” consultancy firms, or some mixture of both.
“We don’t have the capacity or expertise in-house so we are going to partner with a third party and give them the programme.”
Based on our experience, such a statement is indicative of concerns relating to the delivery of business value, not staffing. In this case, the decision to “partner” with a consultancy firm was the proposed solution for managing this delivery concern, and the search was already underway to find a partner company “big enough” to take on the challenge. In a sense, the client had reshaped the challenge of delivering business value to a challenge of picking the right consultancy firm – and then success was assured (or at least thinking no-one ever gets fired for hiring “Top 5”). The client was considering choosing brand and scale as substitutes for measurable results, with price being used as a proxy for quality.
As discussed in a previous blog post, (“A guide on how to use consultants“) hiring consultants is not a poor decision, in fact, it is often a vital part of successful business growth. What ends up looking like a poor decision can be traced back to a lack of knowledge on how to use consultants effectively.
More specifically, not enough attention is given to the consequences of the requests made to the consultants.
Let’s elaborate. Change programmes are established to deliver business value as effectively and efficiently as possible. When seeking assurance for a successful delivery, a common model is to entrust that responsibility to a consultancy firm. In this scenario, the client is asking the consultancy firm to provide two services: i) “lead and deliver the targeted business outcomes as efficiently as possible” and ii) “staff the change programme with the correct skills from your firm”. This type of service request, which can be described as “change programme outsourcing”, has played a significant part in growing the consultancy services into a $130bn industry.
Like any other for-profit organisation, the primary purpose of a consultancy firm is to maximise the shareholders’ value. A partner-led pyramid model has been purposefully designed to maximise the consulting firms’ profitability, through the deployment of large numbers of less costly and less experienced staff. Most client organisations are aware of the inherent conflict of interests when they ask consultancy firms to provide a “change programme outsourcing” service. The question always is whether the conflict of interest has high enough impact to justify considering alternatives.
What are the alternatives? What about a true partnership model that keeps the focus on the original business targets – to deliver value as efficiently as possible? In this scenario, the consultants’ profitability is tied to the success of the client’s business, with an approach tailored exclusively to delivering value for the client. This means entrusting the delivery of the business results to the consultancy firm while taking direct ownership for the resourcing of the programme (e.g. skills can be sourced from client staff, freelancers and consultancy firms).
We, at Pathfinder, have designed our business model according to this philosophy.
We ensure our clients’ business objective is achieved through the effective and efficient implementation of change programmes. In practice, this means that we take responsibility for the success of change initiatives by implementing suitable programme structures and deploying a small number of experts to key roles on the programme. When task-related resources (e.g. BA and PMO) are required, we either coach the client’s internal staff or source appropriately priced high-quality resources from various channels available. When traditional consultancy firms are involved, we manage the resource portfolio and profiles with a focus on maintaining efficiency and maximising return on external expenditure.
An additional benefit of this approach is that it encourages greater coordination between in-house resources and domain experts, creating skills transfer opportunities. This will reduce the dependency on external expertise during, as well as, post programme implementation.
Our prospective client, mentioned above, is now a client. We are working with them to structure their change programme effectively and efficiently. In this case, as in all client conversations, we encourage our clients to think deeply about the request they are making of any delivery partner. We strongly argue that the separation of responsibility for delivering programme targets, from supplying resources, creates a unifying and unbiased focus. It also opens possibilities for more innovative execution models. In our experience, this reduces risk while, at the same time, reducing costs by at least 25%. Of course, the traditional partner-led pyramid model of change programme outsourcing will continue to exist as long as clients perceive value for the extra 25% expenditure.
Authors: Saiid Ordibehesht & Paul Fegan