The Problem with Consultants - 1 of X — Transcript
[00:00:00.11] Jim: Now. So this topic is the problem with consultants and for problem read plural because there’s lots of problems with consultants and we have far too many to go into today but we will briefly go into some of the main ones and one that we was brought to my attention early on is that consultants are self-credentialed, and what I mean by that is there is no professional designation of a consultant. It’s people are consultants because they say they are, and two things, I was just as surprised as anyone to find myself making a living as a consultant, and then what surprised me even more was who calls themselves consultants. Everyone from hair cutters to used car salespeople to life insurance brokers, you name it. back to them. But we’re going to get to some of the things that we’re going to discuss. But on our serious topic, one of the one of the better consultants who was head and shoulders above anyone that I had ever met and older and wiser. So you had a lot a lot to share came and spoke to our staff at one of our annual retreats and topic was is consulting a profession and I’ll let Ken fill in some of the details before we come to Jay’s conclusion. We try not to mention names but it would be wrong I think not to mention Jay and I’ll let you.
[00:01:52.58] Ken: Well, so I should mention Jay was a, I mean, probably my top mentor. I had three or four mentors when I was in a big firm and Jay was one of them. He left the big firm for various reasons. Basically, I think it was an ethical alignment. same reason I sort of left. I didn’t feel the ethics of the firm kind of aligned with my beliefs, and he formed his own consulting firm, and he was absolutely, probably the most brilliant strategic thinker I’ve ever met in my life. He’s still around. He’s just retired and birdwatching now. But we asked him, that’s how we got him to show up at our retreat, because he was a friend of mine. We asked him to show up and give a presentation about what he thought about consulting, and he came in and basically said, asked the question, “Is consulting a profession?” And later continued for about 30 minutes with a fascination. a fascinating presentation to lay out why it’s not a profession and I think when people finally realized where he was headed they were a little offended because we’d always kind of laid ourselves out and he made the distinction between you can behave professionally and not be a profession and very often consultants do not behave professionally, and by that he meant having a code of ethics and clear sense of direction to which you adhere. But you are not regulated. There is no real test to be a consultant. There are some qualifications. You can get a project management professional or things like that. There was an attempt many years. ago, and I actually did this, to be a Certified Management Consultant, but these were groups that were basically for-profit groups that created either training material or, as you pointed out Jim, they were kind of self-credentialing groups that just offered you the ability to have some initials after your name. They were not likely… an accountant or a physician where, or a lawyer where the state actually has a test you have to pass and it’s administered by a independent government, your professionalism is recorded by a independent government agency. These were all, hey, let’s all get together. credential ourselves kind of thing. So that was the gist of Jay’s conversation and really the start of our thinking about consultants being self-credentialed and the start of this topic which is the problems with consultants because they are in part… self-credentialed or self-certified, or they’re really, really, it’s not just the certification, it’s the lack of professionalism. So, do you want me to start on maybe a list of some of the things that I have?
[00:05:09.60] Jim: - Sure, yeah.
[00:05:10.70] Ken: - Well, I mean, I’ve got a long laundry list of things. but probably one of the biggest is I think the incentives for a consultant are misaligned and without some form of regulation, it’s difficult, and by that I mean it’s difficult to control a consultant in your organization, and by that I mean particularly for hourly consultants you know they get they bill by the hour is the bottom line so the more hours they get the better so the incentives aren’t necessarily there to end work the incentives are there to create billings that was a big problem in large firms was you had to keep your billings up or you get fired and even we had standards that people had to adhere to in terms of keeping themselves billable. In our mind, it just meant you were a good consultant if you could keep yourself billable. But it obviously creates a bit of a misaligned incentive, solving the client’s problem quickly and effectively and maintaining your billing. I think. Very often consultants, so this is my second kind of big category of problems, very often consultants kind of don’t have a great understanding of the client’s business context, and we were always pretty straightforward, I’m not saying we solved the problem, but we were pretty straightforward. forward about saying things like, “Gee, you know your environment better than we do. You know your business better than we do. Where we can help is bringing in tools and techniques we’ve seen effective elsewhere and applying them here,” although I think there’s a problem with that. But it tends to lead to a bit shallow observation, a lack of depth. because you don’t really understand their environment. So you come in, you know, particularly when you’re new to an engagement or new to a client, you don’t really understand the business therein, and even, and you can talk to this better than I can, even from state to state in things like Medicaid, there were enough variances there that your knowledge in one state probably wasn’t, I mean, it could fool you into believing you knew everything there was to know about it. But in fact, the operations were so different and the implementation of policy was so different you probably really didn’t understand that state. After a while working in one state, and you and I both had a number of states we worked in for years and years and years, and we got to understand the business environment, but that did take years and years and years. Am I on track so far?
[00:08:11.50] Jim: - Yeah, I agree completely. between one state’s Medicaid program and another, there’s just huge differences, and it took a long time to understand.
[00:08:22.83] Ken: - I think that generalizes across any of the programs we worked in, whether in my case, law enforcement or justice or… health and human services, you know, it just wasn’t the same from place to place, and that took me a long time to realize, and I probably did some early clients at this service. Another kind of thing that I’ve seen with consultants is kind of an over-reliance on, lack of skill, over-reliance on junior staff or things like that to get, again, gets back to that incentive problem about, you know, having more billable hours on a project.
[00:09:18.89] Jim: And I’ve seen, go ahead. But, so there’s a pressure, so we saw it. We were held to it in the bigger firms and that was the pressure for profitability and for a continuous revenue stream, and those evaluations and goals for revenue profitability went down to lower-level staff. I mean, they extended that low, and the difference between our firm, as I don’t remember ever placing profitability goals on our managers, other than the parts that they control, but it wasn’t firm profitability. goals that we put on them.
[00:10:09.87] Ken: Now, we had project profitability goals. We were a little different in that we were certainly not as profit-driven. Now, we made excellent profits for the business we were in, and I wonder if our lack of focus on profits and more focus in our core competencies as consultants led to that. But there was some pressure in that we had minimum billable hours and things like that. I think ours were very reasonable. We viewed it a little differently. We didn’t view it as a profit motive. We viewed it as somebody being successful as a consultant, and if you are clients. will demand your time. So we viewed it a little differently than profitability, but it did work in our favor for profitability as well. You know, people that just couldn’t, weren’t good at bill, not billing hours, weren’t good at serving clients tended to have lower billable hours, and we kind of used that as. a method to weed people out, but it also fed our profitability.
[00:11:20.38] Jim: Yeah. I think the other problem with consultants that, and I saw this as a pattern over time and it didn’t really matter what the, what the industry was or the client. It seems that just the freshness of having new faces show up on the job and being present and being somewhat helpful, led to a dependence where it was hard to end engagements, which this is going to sound like, you know, complaining too much. that the consulting contract should have a definite beginning and an end, and for years we just watched that sort of dependence that was created that would lead to yet another contract.
[00:12:14.53] Ken: I even, I’ve even seen it, I’ve even seen it very purposely done where, particularly where the consultant is implementing or developing some software, and we can argue whether that’s consulting or not. We were more management consultants. We didn’t develop software. We developed tools, financial analysis tools and things like that. But we left them with the client and very clearly left it in capable hands with… the knowledge they needed to carry it forward, but I’ve seen it happen in the software industry where they’re in the software consulting area where consultants create something that they know the client can’t maintain either because of staff or they chose some, they use some obscure knowledge to develop it or chose some obscure language to develop the solution, and it was purposely chosen to do that so that they would have a reliance on them, and I think you and I saw that particularly around Medicaid systems, where there was no way these systems that were developed were going to be taken over by the client. Even if the client had the, you know, the capability to do the work they did. didn’t have the capacity simply because of budgets and things like that. You know, when you got a staff of 10 people, you’re not going to take over a system that was written by 200 people and maintain it in any meaningful fashion. So you’re going to rely on that contractor forever, and that is a business model of a lot of big firms,
[00:13:52.82] Jim: Software development. Yeah you know it’s funny that you say that because at one point when I was still working I met a guy who had married someone from New Zealand and he was a bit of an entrepreneur and New Zealand had something that I think we would call you know, government-funded health care, and much smaller population, right? So no real comparison to the numbers in something like Medicaid or Medicare. But in New Zealand, he figured out how to use a set of off-the-shelf applications to essentially do the payment reimbursement. to physicians in New Zealand and he had a bit of a lock on that business and he never really created the software he just brought the know-how to combine these things that were readily available, and I had a lot of really interesting conversations with him because of the meth that we would see in medicine. where every state’s got its own processing system for a program whose rules and regulations are codified in a federal rule, and so why 50 different systems? It was crazy.
[00:15:22.79] Ken: - Yeah, I mean, that’s a structural problem with the way that program was, you know the history of it and stuff, I mean, with the way it came about, but it did create a business opportunity for all these big firms to create a dependence on the consultant, which I think is a huge, huge problem. ‘Cause, you know, basically the… consultants become, are not independent of the solution because they’re there to sell the solution. You know, they, they, they sell the solution in the guise of consulting, right? They sell software in the guise of consulting or product, any product in the guise of consulting, in the guise of consulting. So, you know, there’s a lot of things we should go. through. But the other one that kind of stands out to me is the short-term thinking of consultants. You come in and you’re there for a very short time. Very often what I saw was the chicken little syndrome. They always produce doom, the sky is falling, or they predict doom, the sky is falling. Consultants are kind of invested in failure because it will result in an add-on to the engagement to solve the problem. So they’re always looking for problems, and very often, if you’re brought in, those exist. The way it’s twisted kind of bothers me a little bit, and it’s one of those, they wanna take all the money possible out of the organization. So they predict this is gonna fail, or this is gonna happen, or this is gonna be bad, and here’s the problems, and it just results in… bad consulting, in my opinion. There are good things that happen in these organizations. Not that we were ever paid to come in and say, “Find the 10 good things about the organization.” We were generally paid to come in and, you know, “Find the 10 problems in an organization.” But there’s also a degree of rationality about what you find that I. find lacking in a lot of consultants and it’s simply, you know, the world’s going to end, you know, the results are like the world’s going to end and things like that, and very rarely were we in a situation, it did happen, but very rarely were we in a situation where, you know, I guess the scale of the impact of the findings were such that somebody I mean, we weren’t QAing or doing quality assurance on airplane manufacturing or something where the wings might fall off. Very often, it could result in a delayed payment or a delayed service delivery or something like that, which, while impactful, is, in the scheme of things, not particularly relevant. So it always bugged me when consultants came in and just said, “Oh, this is going to mean the end of the world if you don’t solve this problem in, you know, 15 weeks or whatever.”
[00:18:31.64] Jim: Yeah. No, we, we both saw so many examples of, uh, consultants who just, they basically turbocharged the cancer that they were brought into. help mitigate or help treat within an organization, and it was self-serving, unfortunately, and it was, I think we both had a niche in trying to salvage failed or failing projects, and so many of those were kind of, and it was coming in after another consultant either said that’s just, you know, business as usual. You know, stay with the program, keep the project going, and that was almost always the wrong advice.
[00:19:22.67] Ken: Yeah. You’re right, which gives us a unique perspective in that regard because probably 80 percent of my engagements were. “Hey, we’ve engaged this consulting firm to do this for us and it just seems like it’s taking forever and costing more and on and on and on,” and we were often brought in to do that to, I don’t want to say oversee the other firm, it wasn’t oversees too strong a word, but to evaluate what was going on in the organization, and often that’s where list really came from, you know, the things we’ve talked about so far, and maybe a few more that are worth talking about at some point in the future, but yeah, it’s, there are a lot of problems with consultants, and I hope some clients listen to this to get start of it and maybe we’ll do a second episode at some point and get into more detail about the specifics of this. Does that sound good?
[00:20:22.90] Jim: I’m guessing we’ve got half a dozen more casts we could do on this.
[00:20:28.59] Ken: Yeah.
[00:20:29.59] Jim: Just to take us back to the opening and Jay and weather consulting as a profession. I think it was Jay who pointed me to a book and somewhere in the title the book was called
[00:20:47.56] Ken: “The World’s Second Oldest Professional” if I remember correctly.
[00:20:51.88] Jim: And you know, if you want to be a good consultant or just understand the industry better, that’s a great book to start with because it goes through. the history of where consulting came from, why it thrived, and why it continues to be a business, and I don’t think that book argues that it’s a profession either.
[00:21:15.14] Ken: Right. No, it doesn’t. As a matter of fact, it argues that, as I recall, that the whole concept of consulting started by somebody creating problems in people’s minds and saying, “Oh, we have a solution.” So it was kind of a, from a business perspective, a bit insidious, but
[00:21:33.70] Jim: Also a genius. Yeah, yeah. The world’s second oldest profession is nothing to
[00:21:40.49] Ken: Brag about. Right, yeah. You understand the reference, right? Yeah, yeah, exactly. Exactly. Okay, so we’ll call this episode, you know, “Problems with Consultant, Episode 1 of X.”
[00:21:51.40] Jim: Yeah, that’s the right thing to do.
[00:21:55.40] Ken: Yeah, just to kind of summarize, you know, I think we mentioned misaligned incentives, you know, where the reason a consultant is there He isn’t always in the client’s best interest. Lack of understanding of the client’s business and business model. I kind of set over reliance on junior staff just to get billing up. That maybe falls into that first misalignment of, you know, misalignment. I think the others, probably the last big one in this piece is kind of the short-term thinking of consultants, which includes the chicken little syndrome, so they can take as much money as you can. Anything you want to close with?
[00:22:49.05] Jim: - No, no, I’m good.
[00:22:51.09] Ken: - Okay.