Published
Articles
Originally
Published in The Business Journal of CNY.
Consultants
and Owners
CONTROVERSY and REALITY
I often get
letters from people who have heard of my business, and want to get
into the "consulting world". A couple of recent quotes
from these letters include (regarding owners), "they would
rather do poorly than get help or give up control (related to investing
in troubled companies who need money to survive)", and "only
when it is too late are they at all amenable, and sometimes not
even then". As a member of Turnaround Management Association,
I promise you all good Turnaround Managers would echo this thought
process.
There is much
truth to that. I am not taking sides, but rather relating the realities
of my personal experiences. Most owners have a very hard time rationalizing
the expenditure for an advisor of any type. Although you can get
consultants/advisors anywhere from free (SCORE for example), to
well over $10,000 a day for a nationally recognized entity (my mentor
often commands $15,000 for a days services), there are viable alternatives
in-between.
Many companies
have holes in their operational systems, procedures, controls, and
planning, so large that the cost of implementing a fix pales in
comparison to the ongoing losses. Often these same companies are
watching every penny of office expenses and telephone costs (which
often generate sales), while gross profit dollars and lost opportunity
costs blows out the back window.
Many clients
I have (with great fear and trepidation in the beginning of the
process in most cases) have benefited from their investment by factors
of 3-10 times or more.
So my advice
to these people who constantly ask me should they become "consultants",
is in every case, NO! There is clearly a need for good advisors;
no question. Some, I believe are even qualified to lend this advice,
although a small percent of the total in my humble opinion. The
problem is there is no strong perception by owners that these services
are needed, and even the few that do realize they need help, or
are told to do it by their banker or confidant, are generally scared
off by the "perceived" high cost, ignoring the benefits.
Yet these same
owners will often spend hundreds of thousands of dollars on capital
equipment, computer hardware and software, and dead-weight personnel,
get 10-40% utilization of the expenditure, and think nothing of
it. Amazing!
Unless you (the
consultant to-be) have a long list of successes, total confidence
in your abilities, great referral business, and the ability to push
owners to do what you know needs to be done, don't jump in.
There is no
room for timidness in the consulting/advisory business. If you are
engaged by a client, you need to quickly show what you can bring
to the party, implement changes quickly to get over that awkward
early stage of "show me or else". You must either have
the courage of your convictions, or don't go in. Owners need to
see (and deserve to see) confidence and results quickly.
On the other
hand, this is rarely possible, in all honesty, in the beginning.
Standard, canned answers can, and often are given, because the owner
needs to hear something to allow him/her to justify the investment.
The truth is Mr./Mrs. Owner, the advisor can only talk in vague
generalities in the beginning of a relationship. No matter what
they (or I) were to tell you, it would be speculative at the beginning.
Any advisor
worth anything has to first understand the culture of the company,
the psychology of the owner, the strengths and weaknesses of the
management team, and observe the intimate day-to-day activities
of the company. Any advice without this knowledge is very suspect
in my mind, and would only by happenstance, be a long-term resolution.
Generally in the first few weeks of an engagement, the discovery
process sends me in many different directions, before I can really
prioritize the highest return and most critical segments in the
proper order. Even after that, priorities continually change.
Unfortunately,
acquiring this knowledge takes time and money. On the flip side,
the rewards are a solution that is very likely to work, and more
importantly, work on a sustained basis.
Whatever the
cost, it is a lot of money; to the owner, or to anyone. The owners
deserve to see why they should part with their money, and where
and how it will realistically benefit them. I wish I had a dollar
for every time I have heard "How can you charge more than my
attorney?". The answer is because a good advisor can make you
a lot more profits than your attorney could ever do. That is not
your attorney's job. By the way, nor is it your CPA's place, other
that in more general ways.
Often owners
will invest in a project, and then stop it, believing that they
can pick up the ball and run with it, since it all seems so simple
now, and save some money in the process. Or they will listen to
ideas, say it seems obvious, and also feel they can do it themselves.
The problem is, if they could, the issues would not still be on
the table. Think about it! Owners need to understand that in fact,
the answers are all usually pretty easy. However, implementing the
right solution, and making it work, is nowhere near as easy.
By far the most
successful relationships I have been involved in, began with general
blind faith by an astute owner since I could not be very specific,
nor did I try to be. I can't (and will not) profess to know the
answers that early in the relationship. I have on occasion left
early in the project when it became apparent that the owner had
no intention or ability to carry out the project. Some owners want
what consultants call a "whitewash" which basically says
everything they are doing is right. As far as I'm concerned, once
identified, continuing on once realizing this, is basically stealing
from the owner.
I have been
told by many consultants that they will not tell the owner what
they believe is right for fear of being discharged. Often, to consultants,
the name of the game is billable hours. Keep the engagement alive
as long as possible. Having worked with a number of larger consulting
firms, I can verify that this is absolutely true in many cases.
Having been
employed by same to train their consultants, I have often used the
example of "would you do this to your father's business, or
your best friend's business?". Inevitably, the answer is "no,
I would do it differently". But there, the fear of being disengaged
is removed.
Both sides are
to blame for the above; the owner's for insisting on instant results,
and the consultants for giving quick, canned answers without doing
a complete evaluation.
But as the relationship
develops, and gets over that awkward early stage, it usually blossoms,
and both sides begin to get excited about the opportunities on the
table, the pending changes being discussed, and trust in each other
increases.
These patient
owners are the ones who reap the rewards of the joint effort to
improve their companies.
Most owners
unfortunately wait for a real crisis to happen before they seek
help, and inevitably the cost is much higher at that point, both
to fix the deterioration, and the tremendous cost of the lost and
missed opportunities that the company will never recoup.
Almost inevitably,
owners who feel they do not need help now, end up seeking it later,
when things have gotten worse. Sadly, this is where 40% of my business
comes from.
Most owners
know when things are not right, refuse to admit it, hope it will
go away, and stay in their comfort zone as the company deteriorates.
The worst part
is, when facing a crisis, owners often tend not to make educated
and rational decisions, and with so many sub-par advisors out their,
may make the wrong selection, and end up in worse shape. The consultant
practice does have (and has earned) a bad reputation. Finding a
good advisor who can help you navigate your company through the
issues of the past, present, and future, is by no means an easy
task.
Much like an
attorney, CPA, and banker, every company needs a trained outside
objective operational point of view to either change or validate
the current status.
So, to aspiring
consultants, think long and hard before you get into this business.
You will have to really love it, have a passion for success, be
a part-time psychology major, and understand that are NO standard
answers.
To owners considering
hiring consultants, be in it for the long haul, or do not commit.
There is no quick fix. And, remember that you hired them because
there was something you could not do.
Dennis Hoppe is President of Change Management Implementation, Inc. in Brockport, NY. He has been a small business advisor to owners of hundreds of companies since 1989. Visit his web sites at www.dhoppe.com and www.hmcexecutivecoaching.com, or call him at 800-724-3525.
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