Why Do Companies Hire Management Consultants?

In the field of management consultants the most vividly asked question to them is – why do companies hire management consultants at the first place? As much as people hate to hear it, the question makes sense: At first glance, it can be puzzling why companies wouldn’t just solve their own problems—whether it be a cost reduction effort or a new market entry—well, themselves.  But there are many reasons companies really need consultants.

Helping Organizations

Management consulting is the practice of helping organization to improve their performance, operating primarily through the analysis of existing organizational problems and the development of plans for improvement. Organizations may draw upon the services of management consultants for a number of reasons, including gaining external advice and access to the consultants’ specialized expertise.

Marvin Bower, McKinsey’s long-term director, has mentioned the benefits of a consultant’s externality, that they have varied experience outside the client company. Consultants have specialized skills on tasks that would involve high internal coordination costs for clients, such as organization-wide changes or the implementation of information technology. In addition their focus and experience in gathering information worldwide and across industries renders their information search less costly than for clients.

You know how sometimes when you’re dealing with an issue in your life, you turn to friends and family for their opinions? Companies often need this, too, especially when making tough decisions. Often times, clients have a perspective on how to solve the problem they are facing but want to make sure that what they’re thinking is correct or are they so close to the challenge that they’re missing the obvious answer. So, they turn to consultants to come in and provide their opinion. But this isn’t just any opinion: Because consultants often work with many different companies and may have worked through this problem in the past with someone else, they can really provide a perspective based on what they’ve seen work (or not) before. And given this experience, they can often bring new and innovative ideas or possible challenges to the table that clients probably wouldn’t have been able to see on their own.

Consultants function as bridges for information and knowledge, and external consultants can provide these bridging services in a better, concise and in more economical terms than client firms themselves. In more recent times, traditional management consulting firms have had to face increasing challenges from online marketplaces that are aiming to cater to the increasing number of freelance management consulting professionals. In 2013, an article in Harvard Business Review discussed the prevalent trends within the consulting industry to evolve. The authors noted that with knowledge being democratized and information becoming more and more accessible to anyone, the role of management consultants is rapidly changing.

Summing up management consultation is very important for every organization to evolve, sustain and fight the competition today and tomorrow. It helps organization to be future ready by giving an outside eye, providing extra horsepower, specialized skills and the best practices across industries.