September 21, 2012

Why Should You Engage the Services of a Consultant?

You may not need a consultant. Yes, indeed. That’s possible. If you are certain that you have no problems at all – in Personnel, Manufacturing, R & D, Marketing, Sales, Finance, and so on – and that you have “maximized profits” such that it is impossible to earn more profit for your company, then you don’t need a consultant. Why spend the money when you are perfect already?

If that situation exists, then you are in an elite group of executives. It is so elite that you are the first member.

However, if you have any problems, like the ten, or fifty or one hundred problems that your competitors have, then you may think about engaging the services of a consultant. I didn’t say hiring; I said engaging the services.

A long time ago a very good boss of mine, while reflecting in a leisure moment, said, “You know, if you never get sick, and you never have a legal problem, and you happen to find an oil well in your back yard, you can live an easy and comfortable life. If that situation does not exist, then you have to adapt.” That can be extended to business. Just as a person may occasionally need the services of a doctor or a lawyer, a business may need the services of a consultant.

There are many executives who have consultants on a regular basis for checkups, just as persons go to their doctors for regular checkups.

Let’s look at the advantages of hiring a consultant:

1-      The consultant provides a fresh and unbiased look at the situation. Sometimes the executive is “too close to the forest to see the trees”. The executive doesn’t have to admit that publicly. He or she simply has to be aware of it.

2-      The consultant provides a service and can be utilized as defined in the contract. Such contracts usually have a clause that states that “…either party can cease this contract before completion of the objectives with X days notice.”

3-      The executive does not withhold employment taxes as in the case of an employee.

4-      The executive usually does not pay insurance for the consultant.

5-      The executive does not contribute to the pension plan of the consultant.

6-      The consultant concentrates all of his or her time on the project assignment. There is no dilution of effort or distraction from the project as happens by design with regular employees who have various other responsibilities and priorities. A primary advantage of a consultant is concentrated effort.

7-      The consultant usually brings some specialized knowledge to a project - for example, FDA regulations as they apply to a particular drug type for a pharmaceutical firm, or some analogous knowledge in engineering, banking, etc.
When a typical ROI (Return on Investment) calculation is performed, comparing the potential profits gained from the consulting project to the cost involved, that number – expressed either as a ratio or as a percent figure – is a pleasant surprise to the executive.

When the cost figures are computed and realized to be favorable, the executive can then concentrate on the consultant bringing an unbiased look, undiluted effort, and specialized knowledge to solve a problem.

Consider the following example:

The Mayor of a city hired a consultant to determine how the life of the bridge into the city could be extended. The bridge was 50 years old and thousands of cars traveled over it every day. A new bridge would cost millions of dollars.

The consultant examined the engineering drawings and observed the traffic over the bridge for several days. At the end of that time, the consultant submitted a report that contained a picture of one of the support beams of the bridge. A bolt was drawn on the picture as was an arrow pointing to the bolt. Nothing had to be torn down and new structures built. Only one bolt was needed in an existing structure. Submitted at the same time was the consultant’s invoice for $50,000.

The mayor, although pleased with the report, exclaimed, “$50,000 for one bolt!” I need a more detailed invoice than this. Please check your figures and resubmit the invoice.

The consultant did just that and submitted the following invoice.

City Bridge Project
Bolt ……………………………………....$10.00
Knowing where to place the bolt  …… .$49,990.00

Enough said.

 The author has 35 years experience in the Pharmaceutical, Pharma Consulting, and Pharmaceutical Packaging industries with extensive experience in the areas of Laboratory Management and Food and Drug Administration Regulations.

He likes to explore and instruct "the business end of science" as detailed in his books, Effective Financial Tools for Scientific Managers and most recently The Executive MBA for Engineers and Scientists, both published by CRC press. Details on both books can be found here.


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