If you decide to get external advice, the one thing I would stress to business owners is to ensure the advisors are truly independent: that they don’t have a stake in the outcome that has the potential to sway their recommendations. At the very least, you need to be aware of their biases and incentives to point you in a particular direction.
Consulting firms are incentivised to generate more work for themselves from any assignment. Any such subsequent engagements are referred to as ‘afterwork.’ In most cases, the goal of the initial engagement is – for the consulting firm – is to generate more engagements. And since they undertook the initial work, that consulting firm are generally in the best position to leverage their knowledge about your firm (gained on your dime) to undertake the afterwork. They will have built key relationships with key people in your firm, have plenty of ‘momentum,’ and have built significant credibility during this first stage of work.
Sometimes, the hiring firm expects an engagement to turn into subsequent phases of work. Even where this is the case, you should still carefully evaluate whether the incumbent provider – those performing the initial phase – are right for the afterwork. Are their skills the right fit? Are they cost effective? Ask for the CVs of the consultants who will be assigned to the project and make sure it makes sense to use them for subsequent phases.
Core to the larger-firm consulting model is the leverage enabled by having a large number of generalist ‘junior’ staff to undertake the grunt work on any engagement. They will do the interviews, data collection, number crunching, and assembling of the reports and presentations. Your key interface – a partner or principal – swoops in when necessary to make it look like you are getting high-level, personal attention. In the specialist strategy shops – known as MBB (McKinsey, Boston Consulting Group (BCG), and Bain) – and many of their smaller competitors, those ‘junior’ staff will be graduates of top-tier universities, often with freshly-minted MBAs. They are not providing their experience – at this stage of their career they have none – they are just there to work the spreadsheets. At the ‘Big 4’ firms (PwC, KPMG, EY, Deloitte), the juniors are first- and second-year accounting graduates (often referred to as A1s and A2s – first- and second- year auditors). Again, they aren’t there for their knowledge or experience. ‘Cannon fodder’ is the term I use to describe these underlings. This leverage model works well and is highly profitable for the consulting firms.
The more senior staff at these firms are the brain trust. This is where the real ‘consulting’ work gets done – the fresh ideas and perspectives that make these firms worth what they charge. Well, at least in most cases. (It turns out many of these more senior consultants seem to believe their value is measured in report pages provided: the more words the better. Hence, the heavy adoption of AI to generate output. I believe this undermines their actual delivery of value, but perhaps their verbosity is part of their client appeal even if generated by AI).
These top-tier brains produce some very clever and original ideas for their client firms. They then use those new ideas to sell into other firms in that industry, and then more broadly into other industries. At times the ideas are turned into books and articles, either for the likes of Harvard Business Review, or inhouse journals like McKinsey Quarterly or Strategy + Business (PwC). This output is well crafted to credentialise the consulting organisation and further their marketing. It’s a neat trick: collate ideas generated from client engagements, knit those ideas into a ‘brandable’ model, and write a bestselling book. A bestselling book is fantastic marketing material as a gift/leave-behind for potential clients.
Another common trick I see used is to offer up three options as recommendations. The first is quite conservative and probably reflects the client firm’s own safe path into the future. The second is less conservative and is commonly based on stretch or optimistic goals. Both of these you already have inside your firm and can be used to bolster the firm’s existing direction. Or to pitch the CEO’s pet project (typically an acquisition). To justify their big fees, though, consulting firms always have their Option 3. This is an outrageous, career-making, out-of-the-box idea – that they generally don’t expect the client to action but helps set the consulting firm up as the ‘ideas’ company. Option 3 is so outlandish that it will require a massive amount of work to make happen, require skills the firm doesn’t have (but of course the consultants will claim to). It is a risky ‘big idea,’ the sort CEOs and board members like as it helps justify the expense of the initial consulting advice. The MBB firms do this extremely well; the Big 4 do it, but in a far less polished way. It is all about the afterwork.
Not all Afterwork is the Same
I’m not saying that afterwork is bad, or even the techniques used by the large consulting firms are dishonest or underhand. The issue generally arises because the hiring firm is simply unaware of the drive (and incentives) for afterwork by their advisors. This can be a surprise in some cases because the hiring firm may have believed the initial assignment would provide all the input they would need, and they could take the advice and execute internally. But that is not always the case. And in many cases, the consultants knew that up front but didn’t think they needed to tell you before the engagement was complete.
Even more insidious is that in many cases the consultants you hire know in advance you can’t or won’t have the ability to implement the plan as presented. They know that in many cases, their report will be skimmed (the Executive Summary may be circulated and read) and then filed. They even have an acronym for it: SPOTS – Strategic Plan On The Shelf.
Early in my advisory career, my firm was engaged by a New Zealand government ministry to review and advise on some core IT system architecture issues. A large, but reasonably standard engagement that involved our top brains (i.e., not me). The outcome of that engagement was very genuine advice for the ministry to adopt a global industry standard for messaging between systems. This was a common issue in many industries, and each industry that had addressed it had developed quite distinct standard to meet the needs of that industry. The ministry received the advice well and thanked us for the work.
Standards-based messaging systems are important in the evolution of industries. The first stage in the development of industries is generally proprietary message systems owned by one of the firms in that ecosystem, often core vendors like IBM or DEC or Wang (back in the day). This results in many different messaging systems in an industry, all incompatible. As an interesting aside, this was one of the problems the US military were trying to solve that resulted in the invention of the internet (in the late 60s), and the TCP/IP networking protocol upon which the internet is based today.
Over time, the user companies and the suppliers (often reluctantly) push to standardise these messaging methods. This gave rise to standards like EDI, X.400, and HL7, and many more. Standards are generally good for an industry in its development, altering competition, reducing monopolistic power, and leveling the playing field for all players. If you are a restaurant wanting to connect to booking platforms or food delivery-apps, for example, you don’t want to have to deal with multiple ways of doing this, or to have to pay for an original one-off solution to be built for you. A single message format used to send to or from the multiple platforms in your industry is the lowest risk and most cost-effective way to achieve this for everyone involved.
As the ministry looked into applying the advice and finding some new core systems they were planning, they hit a major issue: none of the existing vendors in New Zealand offered the recommended industry standard. Any of the multinational vendors were happy to provide their proprietary solutions but couldn’t (or wouldn’t) use the global industry standard. Now this wasn’t some obscure standard that wasn’t really a standard. It was just a bit ahead of the New Zealand market (and many overseas markets it turned out). But it was undoubtedly the future. The ministry was absolutely convinced of this, but apparently in a bit of a quandary. They came back to my firm, spoke to the consultants that had done the original engagement and more or less said ‘this is your advice, find us a solution!’
So, the afterwork in this case could have been to simply go and find a set of possible solutions from existing vendors (i.e., vendors the ministry hadn’t found). Instead (and after some appropriate internal consideration, I am sure) we proposed that we undertake the development of one or more of these core systems – at least as a proof of concept – utilising the standard we had recommended. And the ministry accepted. And an empire was built. But that’s a story for another day.
Maybe Afterwork Is Inevitable
In many of my own engagements, the work has kept going and going well beyond the initial engagement. Sometimes totally new issues arise that have required my ongoing input. I have worked for clients – on and off – for a decade or more. I built solid relationships and offered new ways to add value. As long as the client is getting the value they needed, and the afterwork is not forever ongoing and aimless, this tends to work well. As an advisor, stepping too far outside your wheelhouse, or trying to become just part of the furniture, and things often start failing. And then afterwork becomes a bad word.