Who Hires Consultants, and Why?

by | March 10, 2009

Corporations, governments, and non-profit institutions hire consultants for a number of reasons. Every consulting project springs from a client's need for help, or at least the kind of help that short-term, internal hiring can't solve. Some clients, for example, need to overhaul their entire IT infrastructure, yet they're out of touch with the latest back-end systems or don't have the staff resources for such a large project. Other clients may be merging, but lack any experience with post-merger staffing procedures, and need a neutral party to mediate. Some clients may need an outsider's perspective on a plant shutdown. Perhaps a client wants to bring in extra industry knowledge. And in the 2001-2002 frame, some clients are bringing in consultants with turnaround expertise, because they lack the deep experience with financial and corporate restructuring that such experts can supply.

Consultants get hired for political reasons too. Launching big projects can be very cumbersome, particularly at Fortune 500 companies,. In order for a single dollar to be spent on such a project, most companies require senior executive approval. And without a major consultancy's brand name attached to the project, approval can be hard to get. But once a consulting firm steps into the picture, everyone involved has plausible deniability in the event that the project fails. There is an old adage: "No one ever got fired for hiring McKinsey" (or a similarly prestigious consulting firm.) Some clients still adhere to this as a rule of thumb.

Second, even if a giant project gets the green light, there's no guaranteeing it will be implemented. The reason? Simple bureaucratic inertia. Senior executives lose interest. Direct reports move on to other issues. In short, companies lose their focus. (An insider at a large private global corporation reports that steps from a BCG report from 1996 have been approved but, as of September 2002, have not yet been implemented.) By bringing in consultants to oversee large projects, companies ensure that someone is always watching the ball. In many cases, the correct solution may be quite evident to many, but having it confirmed by an outside party makes implementing a plan easier politically.

In the era of downsizing, consultants have another political use. Companies with an itch to fire a percentage of their workforce often like to bring in consultants. When the consultants recommend a workforce reduction, the company can fire at will, blaming their hired guns for the downsizing. For some types of consulting (particularly outsourcing or IT), consultants are actually a form of cost-effective labor. It costs the firm less money to hire

Filed Under: Job Search


Who does the hiring? Who Is Behind The Money?

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