The Consulting Game, and How Not to Lose at It

April 6, 2015
If a consultant implies that applying leverage is a solid supplier management strategy, they are probably trying to sell you a form of snake oil elixir. Don’t buy it.

I need to be careful on how I approach this topic because, after all, I currently work as an executive level consultant. Throughout my career I’ve had a significant number of interactions with consultancies and, unfortunately, they have often led to disappointing outcomes. As a result I feel somewhat obligated to write a sort of consultant caveat emptor column.

My favorite joke about consulting goes something like this: A consultant is someone who—when asked by a client, “What time is it?”—grabs the client’s arm, rolls up the client’s sleeve, reads them the time off of their Timex and then submits a Rolex-sized invoice.

I hope my clients don’t feel this way about my services but you never know. My favorite movie that touches on business consulting is “Office Space”—not the TV series but the actual 1999 movie with Jennifer Aniston and Ron Livingston. If you haven’t already seen it I’d highly recommend you do. Those of you who know the movie will understand me when I say that I’ve observed a number of consultants who operated in a similar manner to the two in the movie, i.e., Bob Slydell and Bob Porter, who had been hired by Ron Livingston’s idiot boss, Bill Lumbergh, to “right-size” the company.

The bottom line on consultants should be based on the overall long-term impact their recommendations and actions have on client business that otherwise wouldn’t have occurred. That being said, there are definite Buyer Beware “red flags” about the services you receive that you can be used in real-time to judge whether your consultants are up to the task.

The Consulting Process: Part 1

In my experience consulting firms tend to employ people who have no real-world know-how about purchasing other than, perhaps, through their trips to the grocery store, etc. Sure, that was a cheap shot. In my mind, however, it is warranted. Further, I’ve observed that those consultants who can cite a procurement background have rarely held positions of functional authority. Consequently, for them to appear even semi-proficient in supply management they need to operate within a fairly rigid framework, i.e., a “cookie-cutter” type construct. When consultants rely on such a cookie-cutter structure the outcomes of their engagements end up looking pretty much the same, regardless of specific client needs.

I once had the opportunity to talk to two companies that had engaged the same consulting firm. I learned that both engagements had followed the exact same cookie-cutter script and—believe it or not!—produced almost identical organizational and process outcomes. That might be understandable if there had been even some level of similarity in the state of procurement within the two companies—or the businesses they were in—but their situations couldn’t have been more different.

Red Flag #1: If the consultancy you’ve hired appears to be working from and holding to a predefined cookie-cutter-like script, they are likely not up to the task of tailoring a solution to the specific needs of your company.

The Consulting Process: Part 2

Most cookie-cutter consulting processes are based on completing implementation prior to actually moving forward with changes. This pretty much ensures that you will need to engage the consultancy for months or even years before you can start evaluating whether what they are recommending will actually benefit your company and align with its culture. What a deal!

I’m a simple man. I enjoy working on crossword puzzles. No kidding.he key to solving just about any crossword is starting with the shorter (i.e., easier) words and, in doing so, gain insight into the longer, more difficult ones. For instance, I always start by looking through the clues for the 3- and 4-letter words since I can usually figure out a fair percentage of them. Their solution sets me up for solving clues for the longer words that run crosswise to them.

I’ve found that in just about any consulting engagement there are low-risk “quick hit” actions that can be moved forward on even during a period of initial evaluation. Some call this type of thing the “low hanging fruit”—sort of like the three-and four-letter words in a crossword puzzle.

I once worked with a company which had significant fastener requirements. In initially walking through the factory it was obvious they had a problem with excess fastener inventory. I subsequently verified that what they had “on hand” exceeded their annual usage needs. In other words, they weren’t very good at managing fasteners.

To address this problem there was no need to first help this company define their supply management mission/vision; metrics; strategies; organizational dtructure; job descriptions, etc., before putting out a request for quote for a vendor-managed fastener inventory program that had the potential to save the company huge amounts both in piece-price and operational costs. Quick-hit, low-hanging fruit projects can be used to evaluate whether your consultant knows what he’s talking about without having to wait for the rollout of their entire “program.”

Red Flag #2: If the consultancy you’ve hired does not point out low-hanging fruit savings opportunities that can be acted on immediately, you may want to step back from them.

The Consultant’s Process: Part 3

Getting back to the movie, I actually had to work with an “efficiency expert” consultancy that operated much like the two Bobs in “Office Space.” At the time I had already seen the movie and consequently almost started laughing when it became apparent that the process they were going to use in evaluating my people’s productivity was almost identical to that from the movie. I guess I appeared somewhat dubious since shortly after this I was visited by their boss, the president and owner of the consulting firm. Without any pre-notice this guy walked in my office, closed the door and asked me whether or not I was going to be a “team-player.” He actually threatened to “torpedo” (his word) my career with the senior company executive from my company who had engaged his firm if I didn’t appear more enthusiastic about his people’s upcoming interaction with my group.

I felt like I was living outtakes from Office Space. I won’t tell you the name of the consulting firm but will say it sounded a lot like “shredder” which, in retrospect, is pretty appropriate. Anyway, about six months after the “shredders” had completed their “right-sizing” initiative our factory found it necessary to bring back many of the same people who had lost their jobs, only this time as “temps.” Except for the senior company executive who had brought the consultants in—our version of Bill Lumbergh—who (rumor had it) got a performance bonus for reducing our factory’s full-time employee head-count, the entire engagement was a waste of over a million dollars.

Red Flag#3: If, after watching the movie, you find you’ve retained a consultancy that operates like “Bob and Bob,” watch out!

The Consultant’s Functional Experience

I don’t have an advanced degree so I guess I’m a little sensitive about people thinking they can get an MBA and become instant experts in any subject. Over my career I’ve had the opportunity to manage a lot of MBA graduates and haven’t really seen them differentiate themselves in performance from my other less-credentialed employees. On the other hand, I don’t completely discount advanced degrees if they are combined with hands-on experience.

Supply management relies heavily on savvy and personal interactions, not just data analysis, so it’s a functional area where if you haven’t actually “walked-the-walk” you really can’t have much of a command on what’s needed to be effective. I once had an argument with a consultant from another firm in front of a common client about what was the proper organizational structure for a supplier development organization we were proposing. My background includes having established and managed several such groups. In fact, if you ask “people that know,” I am recognized in industry as an expert in supplier development. When I asked what experience the other consultant’s recommendation was based on, it came out that the person I was arguing with had never worked in—much less managed—a supplier development group. Must have read about it in business school!

Red Flag #4: If the consultancy you’ve hired has people with advanced degrees and significant procurement work experience, you’ve got a shot at getting good outcomes. On the other hand, regardless of academic credentials, if your consultancy has relatively no procurement track record to point to, not-so-much.

Commodities, Redux

As a final caution watch out for consultancies that emphasize managing “commodities” rather than managing “suppliers.” In consultantese, “commodity management” is code for “applying leverage.” If you’ve read my previous two columns you understand what my position is on using leverage in the management of non-commodity type suppliers, i.e., just don’t do it. Even so, you’ll find some consultants who seem to consider just about everything a commodity. Why? In my mind it’s an easy way out for people without a deep grasp of supply management.

Red Flag #5: As a rule, supply management requires a lot of spade work—there are generally no “silver bullet” strategies. If your consultant implies that leverage is such a solution, they are probably trying to sell you a form of snake oil elixir. Don’t buy it.

My next column will be on another topic that is likely to raise the hair on the back of some necks: corporate vs. factory buying responsibility.

About the Author

Paul Ericksen | Executive Level Consultant; IndustryWeek Supply Chain Advisor

Paul D. Ericksen has 40 years of experience in industry, primarily in supply management at two large original equipment manufacturers. At the second he was chief procurement officer. He then went on to head up a large multi-year supply chain flexibility initiative funded by the U.S. Department of Defense. He presently is an executive level consultant in both manufacturing and supply chain, counting Fortune 100 companies among his clientele. His articles on supply management issues have been published in Industrial Engineering, APICS, Purchasing Today, Target and other periodicals. 

Read Paul's articles

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