Inside vs. Outside: When to Hire a Consultant

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. 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. 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: