Inside vs. Outside: When to Hire a Consultant

Check out this process for determining whether to handle a project in-house or hire an outside expert.

You've done your due diligence and you know your pet project is a veritable geyser of value. (See last month's article on dud-proofing your projects.) Whether it's scraping two days off your product lead times or implementing a component tracking system or getting all the senior staff together for great golf, strong drinks and tall tales a strategic retreat, we'll assume you know the projected payback warrants an investment of resources.

Well, who are the lucky souls that get to work on your game changing, value-gushing initiative? Can your line managers figure out how to compress the lead times or is a lead-time specialist worth hiring? Could an outsider possibly know your component tracking needs as well as the director of operations? Should you hire a professional facilitator for the retreat or use Bob from HR since he's supposed to be good at getting people to talk with each other and he's got a 4 handicap to boot?

Good questions. After, "How do I find a great consultant?" the query posed most often by clients is, "When should I be bringing in an outside expert and when should we just be doing the project ourselves?" As a consultant myself, I naturally respond to questions with more questions or a quadrant chart. Today must be a two-for-one special because the answer to inside vs. outside is more questions and a quadrant chart.

First, let's get the wrong question out of the way. The one thing you rarely need to ask when you're considering an outside expert is, "How much will they cost?" The total cost of an internal team is virtually always higher than a consultant's fees, and once you factor in any improvement in outcomes or reduction in risk, it's no contest. If this strikes you as poppycock, you can see a very short and simple demonstration here: Why Internal Teams Cost More than External Consultants.

Now we can turn to the questions you already know; the classic rationale executives have relied on for decades when injecting outside talent into a project:

  1. Are we capable of doing this project ourselves?
  2. Do we have the capacity to do this project ourselves?

These two questions are an absolutely legitimate starting point, and the following checklist will improve your answers:

  1. Are we capable of doing this project ourselves?
    1. Do we have the competency to achieve our desired outcome using only inside resources?
    2. Is our experience helping us or hurting us on this particular initiative?
    3. Is our perspective helping us or hurting us in this initiative?

2. Do we have the capacity to do this project ourselves?

    1. Do we have capacity right now to accomplish this initiative?
    2. Is this project the best use of our capacity?
    3. Is this a frequent or recurring need?

You're still only half way to answering inside vs. outside, though, because capability and capacity are all about whether or not you can do the project in-house. You also need to look at whether you should do the project in-house. Below is another checklist to get you started:

  1. Can we get a sufficient result on our own? i.e., can we get close enough?
  2. How tied to other critical tasks is this initiative?
  3. How tied to a source of competitive advantage is this initiative?
  4. Is it more efficient to use internal resources or outside experts. (Note that this question isn't asking which costs more; the focus is risk-adjusted return on investment.)
  5. Are there other factors at play, such as keeping employees on the payroll rather than firing them?

A much more comprehensive checklist is available at this link: The Can We/Should We Checklist. Once you know whether you can do the project internally and whether you should, it's time to break out the uber-consultantish quadrant chart below:


 

"Keep" projects are the ones you should definitely do in house, such as when the operations group actually can do the component tracking project themselves, it's absolutely critical to your marketplace advantage and they are far more efficient than any outsider. In these cases, politely turn away any consultant inquiries and recognize your internal team for their excellence.

"Build" projects are the ones where you are better off doing them in house but either the capability or capacity is beyond you. For instance, maybe your internal staff should be continuously improving your lead times, but right now they don't have the time or the knowhow. In these cases you may hire a consultant for your immediate need, but your plan should be to learn the capabilities or staff up so that you can take over the project or repeat the project internally in the future. Create short-term contracts with a focus on immediate deliverables and skill-transfer.

"Prioritize" projects you handle in-house only if you having nothing of higher priority for your staff to do. These projects you are able to do but really your staff is better utilized elsewhere. In short, this is a judgment call which depends on whether there is unutilized capacity in the short term that can't be employed elsewhere or, perhaps, if you are facing a true cash crunch.

"Partner" projects are the clear time to turn to outside experts. For instance, when no one inside is qualified to design a component tracking system and you'll never need those skills again, or when you realize Bob from HR might be good one-on-one but not in big meetings and, besides, he can't possibly adjudicate the disagreements among your senior staff without getting into hot water.

When it comes to deciding whether or not to hire a consultant, cost is rarely the issue. The answer to your question depends on whether you can do the project in-house and whether or not you should. When the answers point to Partner projects, then start your search for the right outside expert. When they point to Keep, then use your internal staff and, as they say in Australia, Bob's your uncle.

David A. Fields, managing director of the Ascendant Consortium, shows companies how to get extraordinary value from consultants. Contact him by email at [email protected] or call 203-438-7236. His monthly news quiz is available at http://ascendantconsortium.com/newsquizentry.php

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