Maximizing the Value of Consulting

Maximizing the Value of Consulting | HRDQ-U Blog
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Consulting has grown steadily in recent years is poised to be an essential contributor to organizations. At the same time, as organizations outsource more internal functions, this creates additional demand for external consulting. Internally, organizations are creating opportunities for consulting expertise. Sometimes a function has been transformed into a group of consultants. For example, some HR functions have pushed much of the responsibility of HR to line managers. A cadre of internal HR consultants is needed to help with critical issues along the way.

At the same time, questions surround the value of the consulting process. Top leaders prompt external consultants to show the value of consulting. In some cases, funders ask consultants to show the ROI even before the project begins. Internally, consultants are struggling because of the COVID-19 pandemic. In some instances, funders have slashed budgets and eliminated departments

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Maximizing the Value of Consulting

ROI and Critical Issues

Clear evidence is needed that consulting makes a difference in terms that executives and sponsors can clearly understand and appreciate – impact and ROI. The problem is that when executives see something as a cost and not an investment, they tend to cut it, pause it, freeze it, or eliminate it. If they see something as an investment, they support it, protect it, and enhance it. If the value of consulting is not shown in terms that executives can understand and appreciate, they will classify it as a cost. This situation must change.

New external consultants entering the field have a very high failure rate, representing one of the highest failure rates of any professional occupation. Some have estimated as many as 80% of new consultants fail in the first two years.

Although a variety of reasons cause this, three critical issues top the list:

  1. Lack of connection to the business and failure to deliver the proper solution
  2. Ineffective management of the costs
  3. The inability to show the value of consulting.

 

With proper skill-building, consultants can rectify these issues.

Where Do Consultants Fail?

Most consultants enter the field with good intentions and aim to be successful but often become frustrated in the process. The problem is that the consultants don’t necessarily know how to adequately align a particular project to a business need and focus on the business need throughout the effort. Sometimes, the wrong solution is implemented – relying on their “favorite” solution. The result is a disappointing outcome. Often, consultants lack the knowledge and experience to show the value of their work in terms that executives desire. Connecting the consulting project directly to business impact and converting it to the financial ROI is not something consultants have been trained to do. In today’s climate, consultants must focus squarely on this issue.

ROI’s Biggest Concern

One of the biggest concerns in measuring the impact and ROI of consulting is the fear of negative ROI. There is a concern that if the project is not adding value, this kind of study will expose it. Otherwise, the client might not be aware of this. This is a short-sighted view, and the best way to resolve the concern about disappointing results is a two-fold process. First, be proactive with the consulting process and drive the improvement before being asked of the consultant. The second is to design the consulting project to deliver ROI, using design thinking principles. Consulting projects can be designed to deliver the desired impact and even a positive ROI. This involves, essentially, beginning with the end in mind, and the end is a precise business impact measure.

The Solution

The ROI Methodology® is ideal for this situation. It not only captures the data for the consulting success of a project, including impact and ROI, but it also uses design thinking processes to deliver value from the beginning and throughout the process.

The methodology captures five levels of outcomes:

  1. Level 1—Reaction to the services
  2. Level 2—Learning to use the services
  3. Level 3—Application by using the services
  4. Level 4—Impact of the services in the organization
  5. Level 5—ROI, the monetary value of the impacts compared to the costs of the program

 

Along the way, 12 guiding principles guide this value chain to ensure that the data collection, analysis, and reporting are credible and conservative.

The ROI Methodology has enjoyed over three decades of use and growth. It is now the most used evaluation system globally, with more than 6,000 organizations systematically and routinely using it. This process has been adopted by three-fourths of the Fortune 500 organizations and other significant organizations worldwide, including The United Nations, which adopted it as the evaluation system of choice with a UN General Assembly Resolution in 2008. Twenty-six federal governments, over 300 healthcare associations, 150 universities, and many nonprofits, charities, and faith-based organizations have adopted this process.

Author
Update headshot of Patti Phillips smiling
Patti P. Phillips, Ph.D.

Patti P. Phillips, Ph.D., CEO of ROI Institute, Inc., is a renowned leader in measurement and evaluation. Patti helps organizations implement the ROI Methodology in more than 70 countries around the world.

Since 1997, Patti has been a driving force in the global adoption of the ROI Methodology and the use of measurement and evaluation to drive organizational change. Her work as an educator, researcher, consultant, and coach supports practitioners as they develop their own expertise in an effort to help organizations and communities thrive. Her work spans the private sector, public sector, nonprofit, and nongovernmental organizations.

Patti serves as a member of the Board of Trustees of the United Nations Institute for Training and Research (UNITAR). She serves as chair of the Institute for Corporate Productivity (i4cp) People Analytics Board; Principal Research Fellow for The Conference Board; board chair of the Center for Talent Reporting (CTR); and is an Association for Talent Development (ATD) Certification Institute Fellow. She also serves on the faculty of the UN System Staff College in Turin, Italy.

Patti has authored or edited more than 75 books on the subject of measurement, evaluation, analytics, and ROI. Her work has been featured on CNBC, Euronews, and in more than a dozen business journals.

Connect with Patti on LinkedInFacebookTwitter, and at www.roiinstitute.net.

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