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Which Consultants are a Waste of Money

                      How to Sort Out Good/Bad 'Consultants'

ZDNet recently ran a piece (http://news.zdnet.com/2100-9589_22-6192749.html) where a panel of CIOs debated whether consultants are a waste of money. Here's my quiz for 'consultants' to see if you/they are truly adding value or just generating BTUs.

                                                    Is My Consultant Adding Value?

My 'consultant':

1. challenges me as to the appropriateness of certain business decisions. He/She has even questioned the need to pursue the project that he/she would be staffed. You need consultants who put your firm's interests first and not theirs. This is the number one test question because it is the one question that far too many 'consultants' fail. They see the continuation of their chargeable work at your firm as their number one priority. These 'consultants' are self-interested and unprofessional. Get rid of them now!
2. recommends faster, less expensive alternatives to getting the work completed. A great consultant wants you to look good and wants your firm to be richer for the experience of having him/her being there. A 'consultant' that accepts the project scope and approach you give him/her, is either frightfully unimaginative or scared of losing short-term fees. What these 'consultants' fail to recognize is that clients appreciate and reward professionals. They reward them with more work, more referrals and great references.
3. does more than install software or hardware. As I've said before, anyone can call themselves a consultant but just saying that doesn't mean they really are. A person is not a 'consultant' if they are a technician masquerading as a consultant. I may get flak for this, but minor process change suggestions as part of a systems implementation do not qualify one to be a 'consultant'. Nope. No way. No how. If a 'consultant' can't determine the impact of a variety of business decisions on the client's share price, EVA, free cash flow or other measure of import, they aren't really 'consultants'. No, a consultant need not possess a MBA from Wharton to take the name 'consultant', but, they do need to connect their actions, proposals, etc. to the broader business context of their work.
4. is independent and objective. If your 'consultant' or their employer is a channel partner of another firm, receives price discounts or marketing funds from another firm, owns stock in the solution they are trying to install for you, etc., then they are not independent and they damn sure aren't objective. They can talk all they want about firewalls and other mechanisms they have to present the image of objectivity but, the bottom line is still the same: they allowed their independence and objectivity to be compromised. Independence and objectivity are a lot like virginity, once it's gone - it's gone.
5. does more than 'manage' the project. Project managers that just collect time and expense data and report it to clients are not 'consultants'. They're clerks. If they possess a modicum of business savvy they'll at least make a number of suggestions as to how to get the project back on track, which people to switch out, etc. Timekeepers aren't consultants - don't accept them.

If you're interviewing some potential 'consultants' for your firm, here are some interview questions, I'd suggest you ask these persons to ensure you actually get someone who'll serve you and your firm well:

1. Tell me about a situation where you actually recommended to a client that you be rolled off an engagement and why? This question tests the consultant to see if they have enough integrity to do the right thing for the client even if it means he/her firm takes a short-term hit.
2. What would you do if we asked you to work on a project but you knew it would be in conflict with another project we already have underway? This is an ethical dilemma for consultants. Should they accept the assignment even though it is for a potentially doomed project or do they escalate the issue now?
3. Would you be willing to share with us a list of companies you personally have investments with? This question will help you identify if the consultant is personally profiting from the advice they are offering you. A consultant who is transparent and up-front with this information is acceptable but a consultant who hides this data is not to be trusted and their motives should be questioned.
4. What economic and/or marketing relationships exist between your firm and those we may consider or use on this project. This is where firms really try to weasel out of telling the straight truth. They'll tell you about relationships with some legal entities in their firm but magically avoid discussing any deals they have contracted with a joint venture, subsidiary or other entity. Obfuscation is often the rule here. If you suspect a consulting firm is being less than honest here, put in some huge economic penalties for their duplicity. When you catch them in a lie, make them pay.
5. How much of our work together could be shared with my competitors? Consultants argue that restrictions on the re-use of materials they jointly develop with you impede their competitiveness. Don't fall for this. A 'consultant' who takes your money and ideas and tries to sell them to your competitors isn't a consultant, they're a pimp.
6. I see you've worked for x years at one Fortune 500 firm. Why did it take so long? Couldn't you have completed this work faster, more efficiently, etc.? While it's good to see a consultant that is so well-liked and appreciated that a client is willing to keep them on for eons, you need to see if this individual actually provides exceptional value or is just a politically astute bloke who knows how to read the tea leaves, suck up to the right people or play the right games. You need a genius not Machiavelli. Get this one straight.
7. I don't see a real pattern in your assignments. You've worked with all kinds of verticals, all kinds of products, etc. What exactly is your subject matter expertise? When I hire attorneys, I don't get use a personal injury attorney to help with my commercial real estate project. A generalist is rarely a bargain. Avoid them as many generalists are really good at one thing: playing politics and avoiding any real work.
8. Tell me about the last couple of assignments you refused to accept. A good consultant will decline some assignments because he/she is not qualified to complete them. If this person takes everything they're handed, chances are very high that they're a generalist and will learn their way, clumsily, through this project on your dime.
9. Without using real names, tell me about a request made of you by a client who wanted you to do something unethical or illegal. What did you do and why? Amazingly enough, there are consultants who can't even recognize an unethical or illegal request. Worse, they go through with these. I knew a consultant whose client wouldn't authorize the consultant's bill for payment unless the consulting firm bought something for the client from this very expensive catalog. This is illegal. If this consultant has been around for a while, they've had to cross this sometime in their careers. See if they possess integrity and common sense. If not, pass on them.
10. Tell me a situation where you massively over-delivered and under-billed a client. Sadly, too many consultants have a track record of over-billing and under-delivering. In some consulting firms, they reward this behavior. You need someone who is focused on your success and your firm's too.

I hope these questions make your next sit-down with potential consultants more interesting and illuminating. But, more importantly, I hope they help you get better value from your consultants.

Mixed Messages

    Labor Arbitrage - Is It Still Viable? Conflicting Messages from India

There's some confusing, if not conflicting, data coming from various spokespersons re: the economics of Indian outsourcing.

I've seen a number of Indian outsourcers report that rising wages, high attrition and a stronger Indian Rupee are not hurting sales or crimping profit margins. The Wall Street analyst reports I get seem to support this view. However, Nasscom is arguing the opposite saying that the Indian government needs to restore export incentives and/or other tax benefits to offset profit shortfalls caused by a rising currency (see www.computerworld.com "Nasscom: Restore Indian Tax Breaks", 6/18/2007).

At the same time, many outsourcing firms are expanding their non-Indian expansion plans. Tata (TCS), for example, plans to build a 5,000 person global delivery center in Mexico. Expansion outside of India could be a smart business move as it helps Indian outsourcers diversify their risk, get closer to clients and provide services within the same time zone. But, these moves to create a broader global capability also signal what few want to discuss:

• Over-heated or labor-constrained economies are expensive for providers of goods and services. If the economy doesn't correct itself quickly, those firms must seek lower cost options in other economies. Today, we still have a number of large non-Indian integrator and outsourcing firms still building out their Indian presence; however, Indian firms are moving more of their expansion to other locales like China and Eastern Europe. 
• The days of segregating outsourcers and integrators into Indian and non-Indian firms may be coming to an end. Instead, we should refer to firms as national firms (for those whose workers are predominately based within one nation), multi-national (for those firms with a  material percentage of workers based in several nations) and global (for those firms with  50% of their workforce based in over two-dozen countries). Small firms are more often national firms; however, large firms that remain so do so at their peril. All of today's outsourcers and integrators are going global because it's foolish to remain national.

The market in India is changing. Maybe the local industry there must recognize a different market reality. Today, India faces higher labor costs, higher attrition, higher taxes and a stronger economy. The Indian government can try to forestall the effects of some of these by exercising an export economy monetary policy. Japan did this for decades and its economy soared - sort of. When Japan's Central Bank depressed interest rates, bought zillions of dollars of US Treasury notes (to depress the value of the yen relative to the US Dollar) and raise tariffs on imported goods, it made it really hard for Japanese people to do anything but work and save money. These savings provided cheap capital to Japanese businesses and fueled unprecedented economic growth. However, any good economics student can tell you that long-term market actions like this become unsustainable at some time. When they do, it's hell to pay the piper.

India and China have two very different monetary policies. China is clearly following the export economy model Japan used so effectively during the 1960s and 1970s while India is allowing its currency to float.

In the exuberance of the buoyant Indian economy today, business leaders will start to sink more capital and more of their expansion outside of India because the current expansion and economy are overheating now. But that's okay. What India needs is smooth transition to a more mature economy. Industry leaders and individual businesses will miss some perks like favorable tax breaks and no tariffs but if these firms are to truly compete globally, they need to learn now how to adopt the cost structure, marketing expertise, etc. needed to win without these crutches.

The rising wages in India are a good thing. They show a maturing economy and a more professional workforce. The elimination of special financial treatments is also a sign that early preferences (that were used to stimulate local business development) are no longer needed. But, more than anything, the messages we need to be hearing from India aren't "Let us go back to competing and profiting the way we did years ago" but are "Look, now we're even more competitive than ever and see how we continue to win work away from global integrators. We don't need special favors to win as we've developed new capabilities and economies of scale to win without them".

I look forward to seeing the new word from the firms.