13 Questions About Internal Consulting Answered. And Why Organizations Should Take Note
“You can’t sell it outside if you can’t sell it inside.” ― Stan Slap
Over the past 20 years, the growth of in-house consulting groups has been one of the most notable elements of change in the fast-moving Consulting Industry. It is hard to evaluate the extent of internal Consulting. But large companies such as Bayer, American Express, Google, Airbus, Samsung, Dell, SNCF, BASF, Deutsche Post, etc. have built internal consulting structures that can go from small ad hoc teams to fully-developed groups of 100 consultants and more.
Know the Consulting industry
Consulting can create great value for companies who can use it strategically and are able to leverage the advantages it offers. But there are smart ways to do it, and some not so smart.
Even though internal consultants are permanent employees of an organization and typically only consult for one single ‘client,’ they often provide equivalent services, and in many cases are former external consultants. One could argue that Internal Consulting is the ultimate form of specialization of the Consulting Industry. However, in doing so, companies are partially losing the best practice dimension and independence..
There used to be an experience and impact gap between internal and external consultants. However, as the value chain is evolving, internal consultants have now access to better talent and methodologies. On some mainstream projects such as commercial excellence or lean, the impact from internal consultants is now equivalent to the one brought by external consultants.
Costs are often given as the first reason for creating an internal consulting team, according to CEOs. When most companies were growing and consolidating, the prices of consulting firms have been steadily increasing. Internal Consulting is a great option in lowering this cost.
Large companies have professionalized their Procurement, and they now realize how much they spend on Consulting. Cost-Conscious CEOs want to decrease their Consulting Costs and stop hiring only the large strategy players such as McKinsey, Bain, or Boston Consulting Group.
Employees in internal consulting groups are most of the time compensated on the same grids than internal employees. Their full cost is, therefore, two to three times lower than external consultants. This indeed it does not include the cost of the partners or the cost of the beautiful office in central Manhattan.
If internal consulting teams can provide performance close to the external ones, the trade-off will almost always lean in favor of the internal team.
Internal consulting groups can also be used as a career accelerator, inspired by the black belt concept developed by GE. High-potential individuals get trained in consulting problem-solving and managerial concepts. They also acquire the structure and discipline of consultants.
They also get exposed to the top management and highly strategic projects, giving them a broader perspective on the company. After a few years in the Consulting Group, they take a senior position in the organization. Talent is, in this case, kept in-house and developed.
Alternatively, a few years in an internal consulting role can be a smooth entry point within a large organization. The newly hired employees can work on a broad range of projects, and in return, share their experience acquired in prestigious firms with other internal consultants. At the same time, they gain precious knowledge of the company and build a professional network.
Internal Consulting is the preferred choice here rather than hiring an External team. There are projects where the management does not want any outsider view. It might be because it involves a highly strategic decision or very touchy Intellectual Capital. The more people at the party, the higher the risk of breach of confidentiality.
Most consulting firms will argue that they have established “Chinese walls” and that all information stays private. However, it is at times difficult to disconnect from the information you have and refrain from using it in the next project. But working with Internal consultants decreases the risk of using the information collected as a benchmark or reference from another client, with the next one.
Not long ago, working with consultants was seen as a necessary evil, and we all know the joke about the consultant and the watch. However, Executives have seen the benefits over the years in working with External experts. Their image has shifted to a more neutral position, from judgment to support. As you can imagine, the growing population of ex-consultants in the Executive ranks helps as well.
Companies have understood the interest of dedicated teams working on projects independently from the rest of the organization. They have indeed identified a potential lever for improvement in creating teams with the same focus and ways of working as external consultants.
Consulting to its core characteristics is about internal teams, experts in their domains, working on project mode to improve the effectiveness and efficiency of the company.
You will then realize that many functions in the organization fall under this umbrella. What about the excellence functions newly created to work on commercial or purchasing excellence? Or the customer experience task force? The internal audit team working on processes? The business process management group?
Setting up improvement teams is not a new concept. But it is worth exploring the evolutions. You can organize them as a single group or community to professionalize the ways of workings. Or manage the demand and optimize the resources by creating fluidity across the teams. Afterward, you can decide to refer to it as Internal Consulting or to keep it stealth.
Organization structures are now optimized to get synergies and make the most of the existing talents. If you put together the needs of all the business lines and support lines, most companies will be able to get a critical mass of similar projects that could justify building a dedicated team.
You can start by setting your objectives and the size of the team. Having clear objectives can help the team and position their efforts on the path to success. Another big point is funding. There are various funding models, the most sustainable one is to charge each internal Client the full cost of the project. However, for kick starting your practice and demonstrate the impact you could use corporate funds.
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