Warning! Hiring A Management Consultant Without A ROI Guarantee

I believe that the best guarantee for any business owner who is considering a management consultant is to invest time in constructing a well thought-out and clearly written set of project requirements. These requirements must be relevant to project outcomes.

To Begin, Ask This Question: what value do I expect to gain from ABC Management Consultant, Inc., given my project requirements?

The answer to this question will help you and your consultant identify and aim at the most important outcome for your business. Although this idea is a basic concept most business/consultant setbacks are the result of miscommunication or cloudy project expectation.

Takeaway—your frontline is your bottom line! So, your first line of defense is to ensure that you take 100% responsibility for your staff or vendor selection process.

Risk Reversal Guarantee: you need to think about the level of guarantee you expect from your management consultant. There are as many guarantees as consultants in the marketplace. A guarantee is a promise to perform. The remedy for nonperformance will fall on the business owner, or the management consultant, as expressed in your initial agreement. If the business owner accepts the performance risk then no remedy exists if the consultant is unable to increase the value you want.

On the other hand, if the management consultant accepts full performance responsibility then you have a reversal of risk from the business owner to the vendor. Some consultants advertise this option as a “NO FEE; NO RESULT”claim. As a Marketing and Sales Consultant, I refer to this type of promise as a Risk Reversal Guarantee. Most consultants that I am aware of are unwilling to offer a 100% Risk Reversal Guarantee. Even though it’s difficult to find a consultant or firm that will offer a Risk Reversal Guarantee, that doesn’t mean they do not exist.

Risk Reversal Example: Thinker50/HBR recognized Marshall Goldsmith who is an American Leadership Coach as the most influential leadership thinker in the world, in 2011. I participated in one of his coaching workshops and read one of his book, Triggers. Here’s how Mr. Goldsmith expresses his Risk Reversal Guarantee, on his website.

Result Guarantee “Most executives need practical on-the-job learning rather than more intellectual leadership training. Marshall Goldsmith’s acclaimed Stakeholder Centered Coaching process quickly identifies tipping point behaviors and leverages a clear process enabling leadership growth to become embedded in day-to-day interactions on the job.

Efficient Process Executives are busy people, time is their most valuable resource. Investing in coaching only makes sense if there is a guaranteed return on that investment. Stakeholder Centered Coaching GUARANTEES results. Our coaching fees are subject to measurable leadership growth.”

In other words, the consultant is paid when measurable leadership growth is achieved. Again, as I noted, when bringing on a management consultant a well thought-out and clearly written set of project requirements is the first step. This step protects both the business and the consultant’s interests.

Here are a few considerations to think about as you prepare to vet management consultants:

• Establish the purpose of the project;
• Identify emotional motivators that will facilitate action that aims specifically at the purpose of the project;
• Prioritize the project requirements, as well as the motivators, so it is clear when the value is accomplished;
• Get your customers feedback [If the project has anything to do with your buyer base, ask them if the outcome of your project is relevant and meaningful for them], send out a survey, or call 6 to 12 of your customers directly;
• Depending on the type of business you have, focus on one primary strategy combined with clearly defined tactics that showcase action items and who is 100% accountable for a given tactic or set of tactics;
• Evaluate the financial viability of both strategies and tactics defined in your project requirement document;
• Determine the project cost; and, remember to access the cost associated if the project fails. Stated differently, there is a cost and therefore a risk when hiring staff or vendors; yet, many business owners do not think about the cost if the project is rejected.
• Understand unmistakably what your breakeven point is. What value is necessary to impart the return on investment [ROI] desired;
• Together with your management consultant agree on measurement methods vital for understanding the day-to-day project improvements and obstacles. Measurement is essential to reinforce improvement and revising tactics when obstacles present themselves, and they will.

Business owners are busy people. Quality management consultants respect the fact that time is their most valuable resource. As Marshall Goldsmith notes, “Investing in coaching only makes sense if there is a guaranteed ROI, subject to measurable leadership growth.”