Why hire consultants

Many people have the wrong idea when it comes to hiring consultants. You may have come across some employee who just doesn’t understand why Jim the new consultant is paid 50% or more for what appears to be the same work that he or she is doing. It may be appropriate to publish your policy on why and when you hire consultants, first so to ensure money is spent wisely and second, to avoid people expressing their own perceptions of the process through the grape vine and causing morale issues. So when and why should you hire consultants?

For this let me use a few analogies. Let’s say that your business is like your home. If you had a plumbing problem you hire a plumber to fix it. Similarly in your business if you encountered an issue that is not part of the normal day-to-day activities and that can cause you some damage you will need to bring in an expert to take care of it. The plumber or this expert might appear expensive because of what they charge per hour. However they bring with them specialized expertise that you need for only one or a few incidents. Therefore your costs are contained. Surely you don’t want to have a plumber on your payroll and pay him an annual salary. You only want to call him when you need him.

Then there is the situation where you need someone on an ongoing basis. Let’s have a look at your personal accountant or lawyer. They may charge a lot per hour but you need their specialized expertise periodically but not every day. You certainly don’t want them on your payroll, that would be too expensive. Similarly you may have to hire a specialist, say, a business intelligence expert or something like that, where putting them on the payroll would be too expensive and you would not have enough work to fill up all of their time.

The next category of consultant which causes the most confusion and morale problems that I talked about at the beginning of the article is the one who seems to be doing exactly what full time employees are doing and is there at the office day in day out but for a limited amount of time. These are project consultants. They are like when you want to renovate your kitchen or your bathroom. If you are a do-it-yourself kind of person you might think you want to tackle it all on your own. The problem is that you need to find the time with all your other commitments and there is only one of you whereas the job really needs a number of people. So you bring in a contractor and his team to complete the job that you think you probably know how to do yourself. They do this type of work all the time, they have the people and the tools. They get it done quickly and you can continue to do your regular activities.

Another type of consultant is like your gas company. You are with them for many years and they never go away. This is basically what outsourcing is like in the business world. You need a service on an ongoing basis but do not have the infrastructure to provide it nor would you want to come up with the capital required and ongoing expenditure.  You just want to subscribe to the service. Similarly, many large enterprises outsource some or all of their work in certain areas. This is done quite a bit in information technology. So a bank might outsource large portions of its IT requirements to an IT service company and the relationship could go on for years. Some employees who work in the IT department at the bank might think this is bad but the reality is that frequently the bank reduces its risks and its costs by doing this. Let me explain how.

First, many of those consultants and their equipment might be on the consultant company’s site. Therefore the bank does not have to pay rent for buildings or buy equipment. I realize this is not always the case. Some banks insist on their own equipment being used and those consultants to be on site for security reasons.

Then there is the fact that the bank does not have to pay for training, pensions, employment insurance or other benefits that are reserved for employees. There is also the option that the bank has to cancel or not renew the contract for a whole team of consultants. That is not as politically charged as firing a whole team of employees. The newspaper’s report on major downsizing of employees can cause a lot of commotion. Cancelling or not renewing an outsourcing contract usually does not have the same glamour, therefore saving the bank a lot of public relations egg on the face.

Always think of your costs and your risks when trying to decide when and if you should hire consultants.

Hope you found this useful. Send me a comment and let me know.

Thanks for reading.


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