In a downturn, is firing your consultants a false economy or a wise saving?  IAN DUNCAN argues you should pay them by their results

IT WAS reported recently that in an effort to manage costs and survive the economic downturn, Siemens cancelled all its management consultancy contracts.

Radical? Innovative? Pragmatic? Right?

We can all track Siemens’ progress in the months ahead to see if this brave move – which you have to hope is one of many cuts – has delivered the desired results.

Businesses are falling into the red and managers need to find solutions that will generate much-needed cash faster, to refine their business strategy and ensure that they can get on a path to profitability and sustainability.

So what should the first step be? Fire all the consultants, of course. Siemens did it. Others will more than likely follow. But does this make sense? Is this a short-sighted saving that will put your business in jeopardy or is it the elimination of a vanity spend that was more appropriate to the flush times?

Many business leaders are in shock from the uncertainty in the local and global economy. They are experiencing a huge amount of upheaval and stress. Managers need to rethink their strategy, cut costs, retain profitable customers and look for the emerging opportunities that always present themselves in a period of great change. Add to this the need to motivate retained employees who have their own worries, and you have quite the challenge.

Should you keep your management consultants? The bottom line is this: if you hired consultants to help with entering new markets and that market has collapsed and shows no signs of improvement for the next 12-24 months, then release the consultants. If you have hired consultants to develop a brilliant justification to shareholders for something you are going to do anyway, hard times make it impossible to justify.

Value versus cost is what has to be considered. Does your consultant bring you hard assessments of the current situation? Today, more then ever, business leaders need trusted advisers. Simple, honest, objective advice and coaching provide fresh perspective resulting in enormous value when times are hard. This is a time when it is difficult for business leaders to make the hard decisions. They have to cut costs and that may mean reducing staff. They have to cut products, services and business lines that have historically made them successful but no longer generate revenue.

Anyone with these responsibilities to change and forge a new course needs outside eyes, ears and hands that will provide objective and valuable advice.

It is not just about cutting back. Critical to future success is identifying the right opportunities for growth and putting in place a plan and a structure to tap into them fast. One of the key areas that businesses selling products and services need to focus on is maximising the return from existing customers. To be able to capitalise on that you need to be in a position to know what customers want and to deliver it to them in the way they want it. You need to structure your team so they can do that. There is no time to lose.

Businesses that become highly sensitive to the new market challenges and changes in customer behaviour will survive and thrive. Consultants who know how to listen to customers, understand the subtle shifts in their buying behaviour, and know how to develop innovative products and services will add huge value. They will demonstrate an alternative to the standard, knee-jerk practice of price discounting. Moving forward, businesses will need to motivate the retained workforce – in an environment where financial incentives have all but disappeared, empower them and get them quickly aligned behind the shift, focusing on the elements that the 2009 business world requires. Consultants who know how to mobilise change fast and effectively will be in demand.

The market for management consultants has changed. Leading an organisation today is even lonelier, with the consequences of a wrong decision or not acting decisively all too evident across the growing landscape of failed businesses. Getting the right type of help and developing the right relationships with a trusted adviser is now more important than ever.

Being in business is a risk. Staying in business requires taking the risk on the right things at the right time. If you find the right consultants, ask them to share the risk. If they deliver on their promises, they share in the rewards. If they don’t deliver – they get no reward. A true partnership for success can be developed with all parties working to the same objectives and motivations. Measure frequently and enjoy the successes. What have you got to lose?

Ian Duncan is director of Vision Consulting