SIGNALS INDICATING THE NEED FOR A CONSULTANT
James E. Svatko, former senior editor of Small Business Reports, came up
with the following situations that signal the need for outside expertise
from a consultant:
. Lack of a Written Business Plan
. Unexplained Low Morale
. Steady, Constant Increases in Costs
. Regular Cash Shortages
. Chronic Delays or Late Deliveries of Products
. Loss of Market Position
. Overworked Staff
. Excessive Rework Without Achieving Objectives
. Continual Supply Deficiencies
. Lack of Information About the Competition or Market

WHY DOES ANYONE NEED A CONSULTANT?
You may ask yourself why a large company hires a consultant, at some￾times very high compensation,when it already has staffs of experts who,
one would think, should be even more qualified than the consultant. In
a television broadcast several years ago, a 60 Minutes interviewer asked
this very question about consultants to the government.After all, if the
government employees themselves are qualified, why does the govern￾ment need to hire consultants? And why pay them more than the
employees are being paid on an hourly or daily basis?
Actually both the government and business organizations use consultants for a number of very good reasons. In fact, not only are consultants hired, they are hired again and again and held in considerable
esteem. Because it is good business to find a need and then fill it, you
have to understand the reasons for hiring consultants. Let’s look at each
of them in turn.
1. The Need for Personnel. Sometimes even the largest com￾panies lack personnel during specific periods or for specific tasks.They
may need assistance during a temporary work overload, or they may
require unique expertise that is not needed on an ongoing basis every
day of the year. Temporary assistance might be needed, for example,
when a company bids for a government contract. During this period, a
great amount of work has to be put out over a short period of time; the
hired staff may not be available to handle the load without stopping
other important projects, so consultants are hired. Or a company might
need unique expertise on short-term projects, as in direct marketing, an
area I once frequently consulted in. Even today, with the amazing
growth in direct marketing and database management, excluding the
Internet, some businesses use direct marketing only occasionally. So it
does not make sense to hire a full-time employee whose salary could
easily exceed $75,000 or more per year, in addition to benefits.
Therefore, a company is perfectly happy to hire a consultant at fees of
from $50 to $300 an hour or more to accomplish a specific task.The
need for personnel also provides the motivation for the search consultant who is paid by client companies for finding executives or profes￾sionals with specific skills and experience.The large fees these consult ants earn are an indication of the demand for their services.
The large revenue in executive search, another unique area of con￾sulting, also demonstrates the need for personnel and their importance
to a firm.The top firms routinely spend over $100 million in this area,
and a few may do three times this figure.
2. The Need for Fresh Ideas. Not infrequently a company has
a problem, and management believes that its employees are too close to
it to understand all the ramifications. It makes sense, then, to bring in
someone from outside the firm, someone with competent problem solving skills but not necessarily a knowledge of the business. In fact,sometimes the individual’s very ignorance (assuming, of course, a talent
for problem solving) helps to provide the answer. Peter Drucker has said
that he brought to a problem not so much his knowledge about it, but
his ignorance.2 Drucker had a tremendous ability to penetrate through
a confusion of factors, recognize the main issue, and then recommend
ways to solve the problem. His services were well worth the fees he
charged.
3. Company Politics. At times the solution to a problem may
actually be known. However, for various political reasons, those who
understand the problem cannot present it. For example, a division of a
major company once proposed that the company enter a new market
with one of its products, which would have required an investment of
millions of dollars.The potential in this new market was highly contro￾versial within the company.Because the new product would come from
the division that proposed entering the market, the division’s re￾commendations would be considered biased. However, by hiring an
outside consultant to study the same issues, the division succeeded in
accomplishing the same thing.The consultant was assumed to be more
impartial and less likely to be influenced by company politics.
4. The Need for Improved Sales. No business can exist with￾out sales. This is true no matter how knowledgeable its president and
senior staff are, how skilled its financial people and accountants are, or
how innovative its engineers are in developing or manufacturing new
products. A company that needs to increase sales in a short time frame
will sometimes look outside its own marketing or sales staff for help.
5. The Need for Capital. Every company needs money. The
need for capital is extremely common in start-ups, but it is also very
common in successful companies. In fact, the more successful a com￾pany, the more capital it needs. The need for capital is a continuing
problem with many companies. An individual who has expertise in
finding sources of capital will be in continuous demand.
6. Government Regulations. Government regulations, if not
obeyed, can result in fines, imprisonment, or even the closing down of
the business. No company is immune to government regulations, and
all companies need to ensure that they fulfill these regulations in the most efficient and effective manner. At the same time, a company needs
to minimize the negative impact on its business and, if possible, use the
regulations to help in its operation. These regulations may affect a vari￾ety of areas: equal employment opportunity, age discrimination, con￾sumer credit protection, safety standards, veterans’ rights, and numerous
others. If you have knowledge in any of these regulatory areas or can
become an expert in them, there is a real market for your consulting
services. For example, as a university president, I approved large sums
paid to a consultant who had worked in our state government and who
understood the regulatory statutes governing our educational activities.
7. The Need for Maximum Efficiency. All organizations need
to operate as efficiently as possible. An organization that operates at
lower efficiency than it is capable of eventually has problems. More effi￾cient competitors take away its market and drive it out of business.
Inefficiency leads to high costs, making prices noncompetitive.
Slippages, delays, and low productivity all result from inefficiency. If you
know how to increase the efficiency of an organization, you have some￾thing important to sell as a consultant.
8. The Need to Diagnose Problems and Find Solutions.
Businesses look for the MBA degree because graduates with these
degrees are supposed to be very adept at diagnosing problems faced by
business and developing appropriate solutions. Anyone who can do this
is in demand.The more general problem solving you do and the better
you become at it, the more your name will get around. Large consult￾ing firms have capitalized on the need of businesses to have someone
diagnose their problems and recommend solutions. For this reason,
these firms have sought to hire MBAs from the top schools at extreme￾ly high starting salaries in order to build and maintain a reputation for
problem solving. As noted earlier, some individual practitioners are
nationally and sometimes internationally known for their problem￾solving talents, and they are in great demand.
9. The Need to Train Employees. The operation of any busi￾ness is becoming more and more complex, and today many employees
are continually trained throughout their careers. Managers need different types of training for leadership, organizational, and planning skills;
computer operators need additional training in the latest equipment,
techniques, software, and programming. In fact, developments are
occurring so rapidly that virtually every single functional area of busi￾ness needs continual training. If you are an expert and can teach skills
in any area that is in demand, you have a niche in a type of consulting
that commands large fees from industry.
10. The Need for a Complete Turnaround. A friend of mine,
who made a worldwide consulting reputation as a workout specialist,
often was called in by a bank or a group of investors to take over a com￾pany in danger of bankruptcy. He came in as president and did what￾ever was necessary to turn the company around. Sometimes he was
president of several companies simultaneously, and he spent a great deal
of time in flight, continually going from one distressed company to
another. Once the company was sound again, off he went to the next
project. Since many companies sometimes find themselves in extreme
conditions, there is a need for a troubleshooting consultant who can
pull off a complete turnaround (as long as the bank principals or
investors are willing to put up a fight).Turnaround specialists command
heavy-duty fees of as much as $2,000 per day or more.3 William Brandt
became a turnaround consultant while working on a doctorate in soci￾ology. A friend asked him to help a failing coal mine. Once involved as
a consultant, he never stopped. Brandt, only 39 years old, built
Development Specialists, Inc., into a $4 million practice.4
11. Computers and Data Processing. Data processing special￾ists have been with us for a long time, but the technological advance￾ment in this field has opened up opportunities at many levels for those
who know their stuff.These consultants are earning big fees, too. For
example, when my computer had problems, a business friend recom￾mended a computer consultant. She turned out to be a young lady in
her early twenties who had never entered college. She billed at $100 an
hour and was worth every penny when every hour without my com￾puter was costing me money. That was several years ago. Today’s com￾puter consultants make more, and many are not college graduatesActually, the types of consulting are probably unlimited.While fly￾ing across the country some years ago, I picked up a copy of American
Way. One article asked, “Are you losing ground at work? A personal
coach can help you devise a game plan to regain your competitive
edge.” The article went on to describe personal coaching, also called
executive coaching, which at the time was an unusual type of one-on￾one business consulting that is frequently done over the phone or even
over the Internet. The article stated that more than 10,000 coaches
offered their services this way.5 This type of consulting really has sky￾rocketed. Probably 100,000 personal coaches exist today.