When to hire a consultant

I became a consultant in 2003, but not without some trepidation about leaving the safety net of the corporate world. It was hard to break away. I had worked in the tech industry for 23 years and, despite my reputation, a surprising number of apparently misguided companies wanted to hire me.

Still, my mind was made up. As one executive recruiter put it, you could put a fork in me; I was done.

So I told John Bourgoin, CEO of MIPS Technologies, that I would love to consult for him, but wasn't interested in joining the company.

John said he wouldn't hire me as a consultant.

When I asked why, he said, "Consultants take up a ridiculous amount of time learning your business so they can hand you a huge report that tells you everything you already know."

"Let me get this straight," I said, perplexed, "You'll hire me to run marketing but not as a consultant?"

"That's right," John said dryly.

"But I'm the same guy."

"Doesn't matter."

John's very open and honest about his feelings. You've got to love that about him.

And who knows, maybe he was right. Maybe leaving the corporate ranks and calling myself a consultant transformed me into a parasite that charges ridiculous rates, wastes precious time, and presents obvious conclusions. Maybe not.

Seriously, I know what John meant. In the past, I'd come across consultants that fit his somewhat jaded description. Nevertheless, I thought MIPS needed a consultant but John didn't. That happens all the time; so does the reverse. Companies often hire consultants for the wrong reasons and fail to hire them when they should. So here's some guidance from someone who has worked both sides of the fence.

First, I'm not talking about outsourcing development or support functions to contractors or companies that do that sort of thing. That's largely a function of cost-effectiveness, whether it's permanently outsourcing a function or using vendors to mitigate highly variable expenses.

Second, these are my views and mine alone. You'd probably get a different answer from McKinsey or one of the other large consulting firms.

In my view, you hire a consultant for 1) expertise, 2) objectivity, 3) credibility, 4) leadership, and 5) time. Here's a hypothetical example:

Let's say a company has been exploiting a leadership position in the marketplace and executing well on its operating goals for a number of years. Now, competition is getting stiffer and the company is suffering from margin pressure. The company has reached an inflection point. That happens from time to time.

The CEO realizes the company may need new strategic direction. It may need to cut some projects and businesses and add others to meet its new direction. Moreover, the company lacks a process for developing and implementing new corporate and product strategy.

Unfortunately, the CEO already has a full-time job--running the company. The same is true of the company's marketing and business heads. In addition, although many of the executives have been through strategic processes before, they lack the expertise to develop the right process for this company in this situation and the credibility to sell it.

Moreover, each executive has his or her own unique perspective; they're all too close to the problem to be objective. No single executive possesses the expertise, leadership, objectivity, time, and credibility to successfully lead the entire team and ultimately the company through the process.

Frankly, most strategic plans do end up collecting dust on a shelf somewhere. John was right about that. Still, the idea of turning over such a critical process to someone without the expertise to ensure a relatively high probability of success is ludicrous. After all, a company wouldn't hire a novice to design its products, would it?

In this hypothetical case, it would be a good idea to bring in a consultant.

As for common pitfalls, aside from the obvious--expertise, track record, chemistry, etc.--remember these three and you'll do fine:

Be careful what you wish for. You can expect a consultant to tell you the truth, not what you want to hear. If you're not prepared to listen and act on what you hear, don't waste everyone's time and money. You'd be amazed how many CEOs get defensive when you tell them the truth about their company's situation.

Garbage in, garbage out. A consultant's success is dependent in no small part on what the company puts into the process. It takes openness, time, and focus. That's right, even with a consultant, it will still take time away from already swamped executives. It's still worth it.

Set up the problem and commit. The project should be well-defined and agreed upon by the company's entire management team and the consultant. This kind of thing is hard enough; if you start with the wrong assumptions and hostile participants, you can expect poor results. The same goes for half-baked, open-ended projects. If you're not committed to doing it right, don't do it at all.

The bottom line: Just like with lawyers and doctors, working with consultants may be distasteful or even painful, but there are times when you need them if you know how to recognize those times. While trying to go it alone sounds noble or courageous, it isn't. It can cost your company big-time.