Source: Douglas Grey
There are many reasons why the private and public sector use consultants. Some reasons are:
1. Temporary assistance
Clients frequently wish to supplement skills in their organization by hiring trained, proven, motivated consultants on a short-term or long-term basis. Consultants may be hired on a project, seasonal or new funding basis by hiring consultants. Clients do not have to contend with the training, instruction, and long-term commitment for salaries and fringe benefits entailed in hiring a skilled employee. Recruitment costs alone for a skilled employee can be considerable and cannot be justified for short-lived or cyclical needs. Consultants are independent contractors and therefore no tax deductions or fringe benefits are involved.
2. Objective review
Consultants are retained as impartial advisors without any vested interest in the outcome of the recommendations. Internal staff may not be able to see the problems or may not be sufficiently objective. A consultant can perform a competent and thorough analysis of the issues. It is easier psychologically for personnel to adapt to external advice than the internal advice of someone who may be acting out of self-interest.
3. Selecting personnel
A client might hire a consultant for the recruitment of key executives. The consultant is looked upon as being independent and unbiased with the expertise and time to selectively screen and recommend prospective candidates.
4. Third party request for problem identification and resolution
Funders are naturally concerned about any signs of a problem that might put their investment at risk. A funder may need to know whether the problems are related to administrative, personnel, financial, market or product difficulties and how the problems can be solved. Only an outside consultant’s opinion would be credible. This could also be termed a “due diligence”.
5. Surviving a crisis
A business owner suffering from serious business problems may seek an outside consultant to investigate causes and recommend solutions.
6. Initiating change
A consultant can act as a catalyst in stimulating ideas in a highly structured organization that otherwise might be resistant to change due to its size, bureaucracy and institutionalized nature.
7. Obtaining funding
Many non-profit organizations or Small and Medium-size businesses need assistance in obtaining grants or loans for their continued survival. They may lack the expertise, ability or time to research the availability of funding and prepare a persuasive application. Consultants with an expertise in this area act as advisers or agents.
8. In-House education
Consultants are often hired to provide in-house training to keep staff informed of new management and supervisory techniques or technical knowledge and to address employee morale.
9. Dealing with internal difficulties
Outside consultants are retained to review and make recommendations on internal structure, such as the consolidation of departments or services or elimination of redundant employees or executives. The consultant’s report provides the rationale for making the decisions. The consultant then leaves and is not affected by the decision or biased in any way. Consultants can also be used to resolve conflicts between various levels of management and departments. The consultant plays an arbitrating or mediating role that permits frustrations to be expressed so that energy can be directed toward constructive resolution. This does require a specific level of skill and confidentiality.
10. Delay tactics
Consultants can be hired to perform research studies which take the pressure off a company that is being exposed to public or government scrutiny. This also permits the organization to use the excuse of a consultant’s study to justify a delay in decision-making. The consultant is frequently asked to take the brunt of any media attention by being the contact person, which reduces media attention toward the organization concerned. The consultant needs to be fully aware of the associated dangers and risks.
11. Executive assistance
An executive who is aware of his or her personal limitations may request that a consultant review a problem situation, provide advice on how to deal with it, and possibly follow up with implementation. Government regulations at all levels are constantly changing, and companies are frequently not prepared or trained to comply. Consultants may be retained to provide expertise to assist a company in complying economically, efficiently, and with the least amount of trauma to the organization. This type of intervention is typically dealt with in a highly confidential nature and the consultant may be required to be “invisible” in the process.
12. Socio-economic and political changes
Socio-economic and political matters are always in a state of flux. These changes present opportunities for consultants. For example, pollution problems create a need for environmental protection experts, and fuel shortages create a need for energy conservation experts.
13. Government excess funds
Consultants benefit considerably from the expenditure of large amounts of government money. The government may be funding the private sector with the hope of stimulating the economy; there may be political reasons before an election.
There may be a balance in a department’s budget that is quickly spent before the end of the budget year, so as not to reduce the allotment requested by that department the following fiscal year.
Governments also frequently hire consultants to assess needs and provide solutions, and to conduct in-house training.