Seven ways to manage consultancy bills

The expression “bill shock” usually applies to mobile phone users stung by unexpectedly large phone bills, but it could just as easily apply to businesses that use consultants.

Managing the cost of consultants has always been an issue for business, but in buoyant times many businesses find it easier simply to pay up and move on. In tough economic times, however, every dollar counts and it pays to leave as little as possible to chance.

So for businesses that have to use external expertise, how can they be sure they get the outcomes they were after, in the way they want them and for the cost they expected? We asked Tony Chapman, director of management consultant Sara Redman & Associates and a former director at KPMG, for tips on managing the cost of consultants and ensuring that you get value for money. (Chapman’s advice not only reflects expertise acquired over 20 years; he’s also doing a PhD on the subject at the University of Tasmania.)

1. Difficulties within a consulting relationship, including those to do with the cost of the project, are almost always about either the agreed results or the process to achieve those results. So whatever else an organisation does when engaging a consultant it must ensure it gains clarity and alignment on these issues as early as possible.
2. Open communication and a close collaborative approach are fundamental to getting good outcomes in a manner which contains the costs.
3. When outcomes are being created together, it is important to be clear about who is responsible for which elements of the project. Costs get quickly out of hand when there is either a double up in activity or a gap in responsibility which subsequently creates the need to rush completion.
4. As part of a strategy for managing the cost of consultants, it is important to start thinking about your requirements in terms of what you “must” have, what you would “like” to have and what would simply be “nice” to have. Organisations can reduce the cost of consultants by ensuring that the focus of the engagement is on the “musts”. This is not to say you can’t have it all, but when on a limited budget you want your funds to be directed towards the most important results first.
5. The cost of consultants can be reduced by engaging the right consultant in the first place. Here are some of the attributes that organisations should be looking for in a consultant:
   ■ Skills and experience relevant to the project being considered.
   Good communication skills, especially the ability to listen and understand.
   ■ Similar values: alignment and change management are easier if the approaches and values on which both parties operate are at least similar.
   ■ Flexibility: you want a consultant who can adjust elements of their approach if it becomes obvious that a better way exists.
   ■ Good availability, responsiveness and objectivity.
6. When evaluating a consultant, make sure you verify past results, evaluate more than one consultant and listen to your gut: if it doesn’t feel right, don’t do it.
7. Another way to avoid bill shock when using consultants is to request a fixed-fee contract, rather than the usual hourly or daily-based fees for the duration of the project. The number of firms prepared to work on fixed project-based fees is growing, but they are the exception.

On the question of value for money, Chapman says value is subjective and will often vary from the perspective of the organisation and the consultant. Even so, value should be inherent in every outcome delivered by a consultant.

“The challenge is articulating and agreeing on what that value is,” he says. “A consultant will quite often attempt to articulate the value delivered as they see it during the initial discussions with a client. The best consultants are able to understand value from the client’s perspective.”

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