Main barriers preventing the engagement of management consultants
Updated: Aug 12, 2019
In our previous article we discussed the multiple benefits delivered by a strong management consulting industry for the Egyptian economy:
highly qualified job creation
revenues in hard currency by exporting services to neighboring countries
increased economic growth
cross-border knowledge transfer
opportunities for expatriated Egyptians
As proof of such benefits, several initiatives are offered by the Egyptian government and international donors to provide a greater access to management consulting services by funding consulting fees for SMEs. Well advised, SME and family businesses can become international corporates following the successful examples of Orascom and Elsewedy.
So, what are the barriers that prevent decision-makers from calling on the assistance of management consultants?
1. Awareness: What is management consulting?
This is usually one of the first questions asked by business owners or decision-makers: What do management consultants do exactly? Fundamentally, management consultants help their clients to earn more and/or save money. How are these objectives reached? Consultants introduce a scientific approach to decision-making. They analyze several layers of data from different sources, including internal, benchmarks and competitors. After this first analysis, they provide insights and recommendations based on already proven frameworks that ensure the best business decisions. Once decisions are made and targets set, consultants help their clients implement the solutions to reach targets.
2. Cost: management consultants are so smart and highly educated, they must cost a fortune
Business owners are generally very careful when it comes to money; they would reject a product or a service if they perceived it as being a luxury, or if they have any doubts about its necessity. The driver behind this mindset is avoiding any costs unless it is necessary, sometimes even at the expense of quality and long-term results. This approach should not be applied to management consulting services.
First, management consulting should be considered as an investment, not as an operational expenditure. The cost of large projects can even be amortized over three years, reducing the impact of investment on net results. Beyond this accounting rule, transforming a company means higher returns in the future, which will completely cover any expenses incurred to buy a consulting service. The generally observed return on investment is estimated at around three times the cost of consulting services (ROI of 300%).
In addition, management consultants are experts in cutting costs for their clients, which is another cash-flow stream justifying the use of consulting.
3. Confidentiality: Organizations are not comfortable sharing confidential information with external professionals
Like other professions such as lawyers, medical doctors and accountants, there is a code of work ethics highly respected by all reputable management consulting firms regarding protecting clients’ data. It’s called the “Chinese wall” to demonstrate the high regard of management consultants for confidentiality. And, of course, a rock-solid non-disclosure agreement is systematically signed with clients. At Stratexis, confidentiality is very important matter.
4. Autonomy: Organizations trust their internal capabilities to propose the best solutions
Recently, Vezeeta (the online medical reservations site) released several ads for medical analysis provided by persons from the closed social circle of patients and how they can be completely erroneous. These ads demonstrate why it is better to listen to advice from professionals. The same principle is applicable to management consulting. For small business issues, it could be better to rely on internal resources. For serious and critical issues, however, the use of professionals is highly recommended for several reasons:
Internal resources tend to use the same old solutions for all issues. In Vezeeta’s example, it means proposing an aspirin for all types of aches.
External consultants have greater awareness of the best practices of the industry.
Consultants have probably already experienced the same issues with other clients, which means that their recommendations are already proven.
At Stratexis, we believe that our biggest asset is our reputation, powered by the satisfaction of our clients, which means that we are accountable for the recommendations we provide. For example, we will never provide recommendations that may put our clients’ business at risk, unlike internal resources, who may not be aware of all the potential risks and may suggest hazardous proposals.
Of course, these comments apply only to PROFESSIONAL consultants. We will discuss how to distinguish between good and bad consultants in a following article.
5. Power sharing: Business owners are not used to being the sole decision-makers
The fact that business owners and CEOs continue to be the only decision-makers remains indisputable. Consultants have solely an advisory role that involves no decisions. The typical setup for a consulting mission consists of consultants presenting recommendations and management deciding during an executive or steering committee. No conflict of interest can occur between consultants and decision-makers.
6. Potential: Executives don’t believe their company needs to change or has growth potential
Many companies waste their growth potential simply because they don't change. Transforming a family business into a multinational corporation is possible and should be the objective of all business owners. Consultants provide insights about most growth scenarios to recommend the best ones to their clients. Imagine if the Sawires family has decided to keep their construction company as a small family business until now. Orascom would have never become the current international corporation it is, generating $3.7 billion in 2017. The road from the family business to the international corporation involved many different consulting missions at all growth stages.
7. Adaptability: Every company is so unique that no consultant can quickly grasp its peculiarities
Consultants develop unique skills to be very fast learners. They are used to working closely with many different companies, and they know what to do to acquire a very good understanding of their clients’ issues in a very limited time. It is like someone who already speaks a dozen languages. Learning a new language for this person becomes very easy. Of course, long-term relationships with consultants are preferred to capitalize on experience.
After explaining observed barriers to consulting services, we will explain in a following article what are the expected benefits derived from management consulting services. It may reveal why corporates are so satisfied with consulting and why the Egyptian government and international governments are so keen to develop consulting in Egypt for SMEs to the extent of funding between 50% and 80% of consulting expenses.
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