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Consulting may never be the same

June 10, 2010

During the heady days of the Dot Com boom, Wall Street had a rubric for how to allocate IPOs with their promise of riches:

  • ‘A’ clients, their largest institutional investors, got first crack at the best IPOs
  • ‘B’ clients purchased the shares from the A clients while there was still room for the A clients to lock in significant gains and the B clients could enjoy a smaller run up but make some money as well.
  • ‘C’ clients, well, you get the idea.

Per the June 9th Kennedy Wire, a consulting industry newsletter, Marin County, CA recently filed a $30M lawsuit alleging Deloitte was lying when it promised to dedicate a team of its “best resources” for the project and that the firm treated Marin County as a “public sector training ground”. Bottom line – the suit claims they rolled up the school bus, paying Big 4 rates for newbie’s. To get to this point Deloitte must have really annoyed some pretty senior people.  We don’t know the facts first hand and therefore the merits of this case, but this is not unusual behavior for the largest consultancies.

I’ve seen multiple instances where an SAP or Reorganization engagement was staffed by 200 consultants from a big firm which could be broken down as 20% really were absolute top top top drawer, no doubt about it.  The next 50% had been through training and perhaps 1 previous engagement, but had this nasty habit of asking client personnel for “quick hits” and “low hanging fruit” which was then repackaged and sent, under the Big 4’s logo, to the client’s Leadership to show their worth. The final 30% had their ID’s still warm from HR’s laminating machine. Average blended rate was for a first year Senior Consultant, so for the Big4 firm, it was a great leverage model.

How can you protect yourself from being sold by the A team, get the C team and after complaining and threatening to throw them out, receive the B team? Let’s adapt the A, B, C Wall Street rule based on my having turned around and operated a National consulting practice for a Big 4 client of ours:

  • ‘A’ clients have cash, are willing to spend it to solve a well defined and urgent problem, are smart enough to demand and recognize the very best people the Big 4 has and there’s a real possibility of add-on projects in other divisions/subs (the implication being the client is a huge organization). They get the very best of the best.  They can also be ‘B’ clients who caught on to poor staffing by the consultancy, typically noted in a Board query such as “We’ve spent over $115M so far , have precious little to show for it, why?”
  • ‘B’ clients have cash, have a less clear vision of project success and have a lesser chance for add-on work of much significance. Change Orders rapidly get expensive.
  • ‘C’ clients are what you would expect and this is where trainees are often added to the team.  Even if they are not totally billed out at full rate, newbie’s demand a lot of supervision and interaction with your employees and are a distraction.

If you’re not a pure-bred A client, you have to make yourself one by eliminating conflicts of interest between you and the consultants. The largest consulting firms have a culture similar to many developing countries where fairness is seen as weakness.  These firms are a pure pyramid of power with the most aggressive rising to the top.  You must deflect their entreaties to run the project for you and report to your PMO.  It’s a complete conflict of interest, but I see it all the time.  You must run the project, controlling definitions of deliverables and acceptance criteria, budgets, staffing, resource selection, etc.  They provide the experience and knowledge not available in your own company. Most importantly, they have to understand it is their responsibility to use their experience to bring forward reoccurring issues of moving goals and changes in direction or priority before the project gets too expensive for results attained.  Under Time and Materials billing, it’s in their best interests to let things ride for quite a while, to your detriment.  Structure the contract with firm milestones and early warning based circuit breakers, including no-charge re-work.

Another reality factor is your going to the software vendor on an IT project to complain about your Systems Integration project from the Big 4. The giant consultancies often influence the sales of many hundreds of millions of dollars of licenses worldwide so the software vendor will try to make you happy, but only in a very rudimentary way not conflicting with their ‘bread and butter’ source of revenue.

One more thing: the largest customers have a resident Partner as relationship manager, whose earnings and career are based on the number of boots on the ground and who has to balance making you and his Partners happy. This can be quite a balancing act but remember – this Partner’s retirement is based on loyalty to his peer Partners, not you. If you have the guts and the backing, you can achieve miracles by simply saying “it may be time for your firm to assign another relationship Partner to us”.  These days, even Partners are fired, so you’ll have their attention once they see all is not clear seas ahead.

Who’s right – Deloitte or Marin County?  Maybe a bit of both but the outcome could redefine how the largest consulting firms staff projects for years to come, restoring some degree of fairness for both parties.

Rich Eichen is the Founder of, and, a Managing Principal of Return on Efficiency, LLC, who’s website is http://www.growroe.com and is one of their senior turnaround leaders/CROs, Program and Interim Executives with over 25 years experience reshaping companies, Operations, IT and key initiatives. He can be reached at richard.eichen@growroe.com

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