My Uncle Keith used to joke with me that nobody actually knows what actuaries do in their jobs. They simply use complex terminology, fancy math formulas, and have their own Society so that insurance companies keep hiring them and paying them fairly well.
The mystery of what day-to-day work looks like is even more present with consultants. I’ve worked with consultants in the past (as the client while working at a big health insurer) and I always wondered why on Earth we would hire these firms, pay them outrageous fees to come in and tell us what to do in a role that we’ve been doing forever, on a product that we know better than anyone.
In this post, I’ll try to explain the different roles consultants take on and why they’re (sometimes) worth the fees.
Consultants generally have a certain expertise whether it be in an industry (eg: Healthcare, Life Insurance, Retail), a discipline (actuarial models, law, organizational restructuring, M&A transactions, etc. ) or a particular product or regulation (Oracle, SAP, WorkDay, Actuarial regulations, etc. )
Management Consultants (like me and my firm) are hired by large, Fortune 500 companies to help in multiple ways, for various lengths of time.
From what I’ve learned in my very short time in the industry, consultants are most valuable when they’re helping a company accomplish something outside of that company’s core business operations. For example, let’s say a retail company (ABC inc) is acquiring another retailer (MNO inc). ABC is a really successful retailer – they know how to operate their stores, manage inventory and supply chain, and market their products, but they are not experts in facilitating the purchase of another company. That will include determining the purchase price, the legal structure, the new org structure after the acquisition, integration between two inventory systems, two cultures, two strategies and so on.
Since all of those actions are outside ABC’s core operations, they’ll hire consultants to help with all of those aspects for a successful and profitable acquisition and integration. The consultants they hire may be experts in retail, M&A, strategy, systems management, or a combination of these.
In this example you can see why consultants could be worth their weight in gold. A successful and profitable acquisition for a company can be massive for their stock price, whereas a flop can be disastrous and extremely expensive from both a financial and reputation perspective. In addition, rather than having to hire M&A specialists internally (which again is not their core competency), ABC can hire consultants who have worked across the industry on very similar projects, for a short period of time and they can (ideally) hit the ground running. Once the project is complete, ABC no longer carries the costs of those salaries, benefits and training, and they can get back to being a successful retailer.
Great, Mike. That makes sense, but what do you actually do? The best way to answer this is with the ultimate consultants answer: it depends.
In my current role, we’re working on a similar merger-type scenario as my example but in healthcare. As you can imagine, there are plenty of experts on the client team (medical professionals included) and on the vendor team and these people are crucial to a successful implementation. Therefore, in many cases it’s not the consultants’ job to actually DO the work.
Instead, we facilitate, manage, and drive work forward. We ensure the necessary parties are on board and informed, make sure action items are determined and documented, and then track these items until closure. This is sometimes project-management work, but it can be invaluable to the client when they’re putting their expertise towards something of huge scale that’s never been done in industry. Further, when tensions can run high between client and vendor, and relationships aren’t all butterflies and rainbows, consultants can provide a neutral perspective and help bridge the communication gap to ensure all parties are aligned to the common goal.
Therein lies a clear distinction between two types of consulting projects: alone that is focused on the strategy (hire us to help you determine how to approach a problem) versus the execution (hire us to help you actually solve the problem).
Hopefully this helps you understand where consultants can fit in to a large corporate project. You’re not always the subject matter expert, but you need to figure out how things work quickly, develop relationships (or even friendships) with key team members, and learn as fast as you possibly can.
As I move to my second project in the New Year, I’ll be sure to let you know how much of this article I was completely wrong about!
Now I’m about to take off for Chicago to spend the week with my team and enjoy our project holiday party!
Thanks for reading,
Mike