Have come across a few examples of companies cancelling all consultancy projects in response to the downturn. Now while this may be unavoidable in real crisis cases, it’s not a universally good idea. It’s a common sport to bash consulting firms, but they clearly can serve valuable purposes. They have access to knowledge that few individual firms could justify building and genuinely know stuff from other cases that can be useful to you.
So … if there was a good purpose in having them help last year, chances are it’s still a good purpose now. Chucking them out looks like another example of ‘gesture management’ that some companies seem to think they need to do, but don’t.
I’d like to take Kim’s observation a step further. It a great example of what I call “across the board thinking.” That is, faced with our current dismal situation, we are all going to have to hunker down and share the pain — this shared pain will be felt in the from of across the board cuts to [you fill in the blank]. The problem with across the board cuts is that they aren’t strategic — strategy tells you what to do and what not to do, and across the board cutting suggests that no activity is more important than another. But in most cases, this is just not true. As Jim Cramer says on his Mad Money CNBC show, whenever I hear “across the board” emerge from an executive’s lips I hit “sell”! (as in sell that stock).
Across the board cuts to consulting budgets can be particularly damaging. I can provide ample examples of firms that have consultants essentially directing key strategic initiatives. Initiatives on which the future competitive position of the firm is ostensibly based. There is nothing wrong with this approach, as long as part of the consulting engagement involves teaching key firm players how to run the new thing once its built. The problem with firing the consultants is that now no one in the firm can cover those particular bases. And, to add insult to injury, those fired consultants are likely to be laid off from their firm because, as the consulting firm cuts back, many will start by cutting those without current assignments. The irony here is that the focal firm is now off track in terms of move a critical strategy plank forward and the consulting firm has lost folks who might have more human and social capital than the people it is opting to keep.
Yes, quite the mess.