Are consultants expensive?

publication date 09.11.2008

Je drahé poradenství?

All folks are curious to know how much a consultant is. We still tend to compare, unfairly though, the work done by an employee with the work done by a consultant. Comparison made between the sum on the consultant´s invoice and the employee´s paycheque in respect of the efficiency of the financial means thus expended, clearly speaks in favour of the employee. This is, however, the wrong way how to see consultancy.

All folks are curious to know how much a consultant is. We still tend to compare, unfairly though, the work done by an employee with the work done by a consultant. Comparison made between the sum on the consultant´s invoice and the employee´s paycheque in respect of the efficiency of the financial means thus expended, clearly speaks in favour of the employee. This is, however, the wrong way how to see consultancy. A consultant is hired if the client does not know what to do or wants to avoid future problems or they temporarily miss a needed specialization or they do not need such a specialization permanently. 
Therefore, we have to evaluate a consultant´s contribution to the company. It is best to compare the service of a consultant to that of a lawyer whom we only hire when we are troubled by a particular sphere of law – inheritance, divorce, donations, etc. This applies to all spheres of consultancy.
It generally holds that a consultant is cheaper than a consulting company (except, perhaps, for combinations of unique branches or a really narrow specialization). In a consulting company, it is an established practice that, on a consulting day, a whole team of consultants arrives, and then you are supposed to pay for each of them. In such an instance, it is desirable to check if it is really necessary for all the consultants to be present in the negotiation. A general rule applies here that the bigger the team the more you have to check whether the work they perform is really effective and needed by the client. For smaller companies it is more appropriate to choose their consultant from among those who combine more specializations then to hire a consultant company. 
The price of a consultant´s services is normally set in several different ways:

  • Hourly rate: it normally ranges in between 500 – 5.000 CZK, depending on the particular branch (for instance, in quality management the rate is 500 – 2.000 CZK, in public relations the rate is 1.000 – 5.000 CZK and even higher) and is also client-specific. A small company of only 10 people will get lower rate than multinationals, such as T-Mobile. It is logical, as in a big corporation there are bigger and more complex problems to resolve. On the other hand, it is up to the client´s consideration whether a carefully selected consultant, being given the prospect of a long-term cooperation, is going to perform the same as a team of consultants or not. For it is crucial that the client actively participates in what they have agreed on with the consultant. The hourly rates of big consulting companies or top specialists can be even higher.
  • Monthly fixed rate:  a fixed rate is totally company-specific and depends on the company´s standing, the scale of work and the time in which the results are expected. Preparation or maintenance of a small-scale quality management system may cost around 10.000CZK per month. In comparison, provision of the public relations and marketing services will range from 50.000 CZK a month up, particularly if the consultancy agency actively participates in specific activities.
  • Task remuneration: a job is prepared in advance, and the client wants the job done by the consultant. The price should be in proportion to the work done as well as the results achieved. In this arrangement, both the parties know exactly from the beginning what they want to achieve; on the other hand, they risk they may not estimate correctly the entire volume of work.
  • Share in cost economies, profit and even loss: this variant is used as well, if the consultant´s share in cost economies can be clearly proven. The snag here is how to distinguish the contribution of the employee from the one of the consultant. How to find the limit where the employees alone would achieve the same results, perhaps a little later, and where they would never achieve them without the consultant.
  • Share in the bottom line: an agreement can be made and the consultant´s work can be bound to an increase in the company´s bottom line, so that they are paid from the increase. Thus, the consultant´s motivation is set clear – do whatever you can to make the business grow. This variant, obviously, requires a certain degree of trust, and documentation of the achieved bottom line. In particular at the time when entrepreneurs need to optimize their results with regard to tax payment.
  • Combinations:  what works really well is a combination of a lowered hourly rate along with a share in the bottom line, or a remuneration for an accomplished job.

A consultant can markedly accelerate the company´s progress: they can help to introduce and optimize different systems, lower the costs, find new solutions, create new products, even get new orders or, as the case may be, unite workers in a team. Also, a consultant can stand in for some job positions in a company, for example, a quality manager, a safety engineer, a marketing specialist. However, everything depends on the company´s nature, its size, focus, systems used and local custom practice. (The author of this article is the owner of a consultancy portal ownway.eu)  

Do you need hints on how to choose a good consultant for your company to work in a specific area? You can take advice from Jiří Střelec, a specialist for a Firmy weekly, who specializes in this sphere.  E-mail: jstrelec@ownway.eu;  Mobil: +420 737 279 91

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„The system only works provided that the management makes its part.“ more >>

Jiří Střelec Jiří Střelec

Every management system generates results and a more effective performance only if it includes everybody and everybody uses it properly. If the management regards the system only as a pro forma profit-making tool for the workers, the system is never going to work as it should.