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Berkonomics

Hire a consultant; ignore the advice!

The ideal use of consultants…

At one time or another, most all businesses use consultants to fill the gaps in knowledge or to provide guidance for management.  Consultants are good in that you can sample their work with short projects, change to other consultants quickly, and stop using them when a project is completed.

A personal story of ignorance of good advice.

I have a partner in a consulting practice that specializes in the travel industry.  Several years ago, we were hired by one of the largest companies in the industry (yet another Fortune 50) to perform a top-to-bottom audit of their processes across 27 facilities, and recommend measures to increase efficiency, increase income, better the customer experience, and of course, decrease costs while also increasing the quality of service.  We were quite confident that our services would yield great, measurable results.  The work continued for about eight weeks between the two of us as we visited the 27 locations and worked with employees in departments across all disciplines within each location and at central offices that performed services for all locations.

The result of the consulting project…

Finally, at the end of the project, we had identified nineteen specific issues, each of which would, if implemented, accomplish one or more of the goals outlined at the start of the project. The sum of the savings and increases in revenue were worth multi-millions annually, well worth the implementation of most or all of the recommendations.

[Email readers, continue here…]   On the final day of our assignment, I was responsible for the “reporting out” to the assembled twenty or so executives in the large conference room of this major corporation.  I started my presentation, which had been carefully documented in handouts and PowerPoint, with this story…

A unique description of the “ignore” lesson.

“I want you to all imagine that it is tomorrow morning, looking back upon today’s reporting of these past months of work by your consultants.  Imagine that today I build for you a beautiful sandcastle exactly at the water line of the ocean nearby.  Tomorrow, we both will visit that beach and look at the water line, and find not a beautiful castle, but just smooth sand, just as it had been the day before building our beautiful sandcastle.  In other words, I would not be surprised if you accept our report today with enthusiasm, but then in the overwhelming rush of daily business, fail to implement few if any of these recommendations that you so enthusiastically received.”

The story is true, and the results were as I predicted.

A few of the recommendations were implemented over time, one with great effect and even a national advertising campaign behind it (that you surely saw on TV).  But most were just ignored.  I imagine that our report sits today on someone’s shelf, filed with others from past and from following months and years.

Unfortunately, it is human nature to enthusiastically ignore to act upon recommendations of third-party consultants. There are many, many exceptions, but far more instances of this in the business world.  Not all consultants give advice worth taking, of course. But when they do so, it is only as good as that which you implement.

 

  • I was part of a team that did an analysis of a company’s problems in the Japanese market. We found the problem (mismatch of expectations and strategy between company and local distributor) and recommended solutions. The day of our presentation to the company, only 1 person from the company showed up. The next day we found out why when they announced their acquisition by a bigger company, making their Japan distribution strategy irrelevant. After the acquisition, the people we worked left to start Ariba and then Docusign.

  • Hey Dave,

    Love your tidbits – they’re just amazing. I was a consultant for many years and I understand exactly what you are saying. I was working for a $700 million a year men’s apparel giant, and they acquired a women’s brand company, and hired me to do research on merchandising and marketing positioning. I spent three months studying who the customer was and how she wanted to dress. But the merchandiser and designers decided they wanted to go contemporary styling and marketing with this 75 year old man’s brand with the new product and it totally bombed out. They ended up selling the women’s business which had eight brands to the former president of the women’s apparel company.

    I just don’t understand why they act like they want change and then listen to people inside their business. It’s like today apparel companies say they want to be consumer centric but they’re really not interested in the ideas that would make them consumer centric because they ask the advice of their managers.

    More testament to the fact, that change and innovation rarely comes from inside of an industry, or a corporation, because of the risk adversity and the reliance on underling opinions.

  • Dave, sound advice as usual. Although I’m not sure if it’s “human nature” for the CEO to ignore the advice he/she has paid for as much as it requires doing something differently from the way the CEO (and team) have been doing it until the receipt of the consultant’s report. Our experience has told us time and time again that CEOs – especially entrepreneurs and founders – want to somehow have their ideas validated in a way that will get the desired results without really doing anything uncomfortably different. We’ve never found a good way to integrate that thinking into our reports.

  • Dave,
    Well said! That is the number one frustration for consultants. In my experience, it is easier being the CEO – but then you have to deal with the Board and a variety of investors with different objectives and timelines. And that can make one wish to do consulting!

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