Why Good Management Consultants Are So Expensive?

although I am writing this blog post to note down my precise thoughts just for a handful of people, it might be useful for  a whole lot of other people too. That is why I am making it public.

This post is written in response to a frequently asked question that I face – and having no FAQ section in our website, this will have to act as a substitute.

Once again, this week, I was asked to justify the ‘very high’ hourly rate that I charge for my work.

Somehow people have no qualms paying nearly double of my rate (including support staff) for a large branded consultancy service – but resent a much lower rate when it comes from a much more competent consultant without a famous multi-century brand.

However, the conversation always starts as a justification for the hourly rate without any comparison points.

I recall several l years ago a similar conversation where I was challenged to justify the rates by a highly (extremely) competent senior executive. He, rightly, pointed out that he could do almost everything that I could do, so why would he need me.

I replied there is only one of you in the company, and not many more in the world.

But then, I pointed out that today’s executives are working at a pace which is akin to driving at 150 km/h (90 mph) on an extremely busy and rowdy highway. There are vehicles large and small rushing at breakneck speed from all possible directions. people are barely keeping to their lanes and easily cutting each other off. Risks of accident are extremely high. Those who meet with an accident are left on wayside. Those who make it to the destination, barely have time to recuperate before they start on another project.

No one has time to look in the blind spots. If you slow down you are overtaken and left behind – never to catch up again. Others are ready to jump into your seat at a moment’s notice. And, if they are not as competent as you – it does not matter.

If you don’t look in the blind spot, you risk accidents.

What you need is an early warning radar system that assists you to plot your way through the maze around you – taking all the relevant data points into consideration.

You pay the price for collision avoidance, for arriving safely at your destination with your sanity intact, and for enjoying the journey to a large extent.

After some thought, my friend on the other side added his keen wisdom to the conversation.

He said (and I paraphrase) “for a moment I was disturbed by the thought that if they are not as competent as me, it does not matter. But then I realised it is true, because branded mega-consultancies act a airbags, or other bags, of some sort. So my main decision now is whether I want preventive care, or palliative care!”

I pointed out the obvious – that prevention was far more valuable than palliation.

And, that size or brand image had only a small impact on the style of consulting practiced by a person.

In the end, it all came down to personal ethos. And, that should be the most important consideration when you hire a management consultant.

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Vivek Sood

I write about "The Supply Chain CEOs", "The 5-STAR Business Networks", and, how to "Unchain Your Corporation". In my work, I help create extraordinary corporate results using several 'unique' supply chain methodologies. Contact me for interesting, high impact projects, or, to get access to my IP for creating transformations using these methodologies.

  • […] In the case study quoted at the start of this post, the outcomes were a lot different than what was expected by the majority. The board made a bold decision and pulled the plug on the project in the middle. That single decision most likely saved the company in the long run. They could have saved a lot more money if, at the outset, they are created governance structure to ensure just a few key points.    After all, prevention is better than cure. […]

  • […] In the case study quoted at the start of this post, the outcomes were a lot different than what was expected by the majority. The board made a bold decision and pulled the plug on the project in the middle. That single decision most likely saved the company in the long run. They could have saved a lot more money if, at the outset, they are created governance structure to ensure just a few key points.    After all, prevention is better than cure. […]

  • […] In the case study quoted at the start of this post, the outcomes were a lot different than what was expected by the majority. The board made a bold decision and pulled the plug on the project in the middle. That single decision most likely saved the company in the long run. They could have saved a lot more money if, at the outset, they are created governance structure to ensure just a few key points.    After all, prevention is better than cure. […]

  • […] In the case study quoted at the start of this post, the outcomes were a lot different than what was expected by the majority. The board made a bold decision and pulled the plug on the project in the middle. That single decision most likely saved the company in the long run. They could have saved a lot more money if, at the outset, they are created governance structure to ensure just a few key points.    After all, prevention is better than cure. […]

  • Shelly Colin says:

    Precise yet comprehensive article. Your article discusses every aspect of good consultancy. Annual reports published by several organizations are proof that consultancy services are always good to acquire. I have been working in a company since last five years and I have practically experienced this philosophy behind hiring expensive consultants. I couldn’t understand for years why so much emphasis is laid on acquiring services of expensive consultants. Now the fog on mind disappeared and I have realized the expensive consultants are the experienced ones. They have dealt with so many challenging problems during their professional life. The leading companies understand this never compromise on consultancy services no matter how expensive they are.

  • McGeorge says:

    In high school, I learned how important it is to consider all the possibilities and probabilities before planning any event. We as a team organized many events in school and every time we plan for an event, I remember doing all the paperwork on what and what couldn’t go wrong. Thanks to this approach of us, we were able to execute many events successfully. I am sharing this here because this article talks exactly about the same perspective. Look at every hole no matter how insignificant it looks primarily. On a road full of bumps even the expert drives stumble. If risks have not been cured no wonder the successful companies’ breakdown.

  • Jeff Conner says:

    At the very start of your article, you have talked about the expensive consultancy services you offer. The point to ponder is why people ask for justification from you for your expensive consultancy services. If people come to you besides knowing your rates it means they trust you more than the other consultants in the market. The trust and quality don’t require any justifications. If I were you, I wouldn’t have replied to such pointless questions. In my estimation, such executives suffer from trust deficit and don’t let themselves believe anyone until they are satisfied. Anyways, this was an awkwardly new thing for me that I came to know after reading your article.

  • Paul Parker says:

    I am a software engineer. My field is full of risks and challenges. Negligence is catastrophic and there is no room for mistakes. In terms of risks, we organize ourselves for both pro-active and reactive responses. Risks are still so unpredictable that besides taking so much preventive measures happen accidentally. During my whole training, the trainer focused only on risk avoidance and risk prevention techniques. Software engineering is nothing without technology and in every second of the day, we are interacting with computers. That is why there is too much risk involved. The system may shut down or may behave abnormally. The data may be lost or hacked. These are the risks that have the potential to occur at any time. I agree with your article and approach that if you ignore the blind spot you may encounter risk. In any field, risk prevention and mitigation are of prior significance.

  • Linda Walker says:

    Inexpensive consultants often time given expensive setbacks. The price we pay for good consultancy is actually the price we pay for own good. The cost we spend on consultancy services actually double our profits. Good consultancy means improved results. As you pay to consultants for your very own benefit. Suppose you hire a less experienced consultant just to save your money and you fail to achieve your project milestones and you miss project deadlines. Why is it so? Digging the roots of this problem will take you to the consultant. The poor decisions making the ability of your consultant is the main cause behind all this mess. Pay wisely on your consultant so that you may not repent on your choice in the future.

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