70% of clients who engaged consultants (including management consultants) were not fully satisfied with their project results, according to a global consulting client satisfaction study undertaken by the RFP Company in 2011. Only about 30% of all consultant engagements delivered results which either met or exceeded client expectations. Another survey conducted by the “Manager Magazine” in July 2011 showed that in Germany, 57% of clients were satisfied with the work delivered by external consultants.
Both studies show surprisingly low levels of client satisfaction and illustrate how risky and challenging it can be to buy professional services. Selecting the “wrong” consultancy, measuring return on investment (ROI), project overrun or loss of intellectual property represent certainly some of the main risks for clients. However, there are several simple measures that buyers can undertake to mitigate the risk of purchasing consultancy services and therefore increase project success rates:
- A rational supplier selection process can help you find a consulting firm which fits your organisation’s culture and delivers tailored industry expertise. Checking references and speaking with colleagues and business partners will also give you a clearer picture.
- Defining project scope and determining success criteria is another essential risk mitigation approach. Both clients and consultants have to agree on clear and especially realistic targets.
- Furthermore, both parties have to agree on an appropriate payment model. A “results-based” pricing model can clearly reduce the risk for the buyer, as long as the project outcome is measureable. A “fixed price” can keep the buyer’s risk low, as the costs are predictable. But in order to avoid project delays, clear and realistic deliverables have to be set in advance. If the project involves a high level of uncertainty, a “time and materials” basis is likely the most suitable pricing method, but it also implies the highest risk for the client. However, choosing hybrid models can further reduce risk, albeit it also implies managing more complex contracts.
- A non-disclosure agreement stipulated in the contract can prevent the client from losing its IP to third-parties. Another effective precaution is defining penalties in case certain objectives are not met.
- Closer engagement and communication with suppliers, in addition to regular project reviews, will contribute to better project controlling overall.
If procurement is aware of these challenges and mitigates them accordingly, management consultancy projects are likely to yield higher satisfaction rates across all stakeholders.