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Cheaper Advice

It's a buyer's market for consulting services, but if you don't manage an engagement carefully, you could pay more than you bargained for.

Cambray is now considering using the firm’s outsourcing capacity for administrative tasks like processing European payrolls. Throughout the process, she says she and her controller look at monthly consulting charges and compare them with their estimate of the time it would take to do something internally, “and we reassess with every new project we add.”

Consulting firms say this type of thinking is now par for the course. “Less today is better than more tomorrow; clients are aiming to do smaller projects rather than big bang,” says David Michelson, head of Tata’s business-process and change-management consulting practice in North America. Projects involving outsourcing (and often a new source of cash) are illustrative, with the time-consuming strategy piece getting short shrift.

“A year and a half ago, clients would have had big internal debates about whether to do an internal captive or go offshore, or to just improve existing processes,” says Bob Cecil, global executive director for Equaterra’s business and financial processes group. “Now executives aren’t tolerating a lot of back-and-forth to get everyone on board; they want to move faster to a solution.”

Staff Time Counts

Finally, a key ingredient of a successful consulting engagement is taking a realistic view of how much staff time it will take to manage the consultants. Compellent’s Judd just hired Grant Thornton to do a “382 study” (as in Section 382 of the Internal Revenue Code) to maximize net operating loss carryovers, an R&D tax credit study, and some sales tax work. “Just on the R&D piece, the credit from the federal government could be 10 to 20 times what we’ll pay the consultant, so it’s a real no-brainer to do it,” he says. But with the work slated to span six to nine months, Judd is keeping an eagle eye on how many hours he’s being billed for. Without formal milestones in the contract, “the number-one thing” is to dedicate a staff person to make sure consultants “aren’t wasting time when they’re on site,” says Judd. To that end, he waited until year-end reporting was over so that one of his directors of finance who “is not a tax expert but knows everything Grant Thornton needs to provide” could take on the job of monitoring the consultants.

The cost of staff time is important to bear in mind even when the consulting work is done on a contingency basis, or ostensibly for free. Crane of ModusLink Global Solutions is currently interviewing various firms to comb his accounts-payable records for errors and assess his real-estate portfolio for additional savings. With data housed all around the world, though, the company will incur the upfront cost of having a staff person assemble the necessary information, with the risk that no savings emerge. Not to mention that the work is “quite boring — there’s no way around it,” adds Crane.

But the result of a consulting engagement ought to be exciting, in terms of better growth, profitability, or efficiency. Make sure that the consultant takes your company where you want it to go — and that when it gets there, you aren’t shocked by the size of the fare.

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