By Michael J. Green, BPR Methods
There is a common misconception that hiring outside consultants is more expensive and constraining than utilizing internal employees to accomplish the same tasks. If you are solely comparing the consulting fees with the employee’s salary you may be right, but this view is incomplete and misleading. Whether the consulting firm charges $50 or $300 per hour, the overall advantages of hiring outside business experts must be analyzed when making the “make vs. buy” decision.
The intention of this paper is to demonstrate (10) reasons why hiring outside consultants may be advantageous over utilizing internal employees. Obviously, the reasons are situational and my not apply in all instances yet most senior managers do not think of these advantages when setting out to manage projects with a defined objective. Below are the (10) reasons that I view as material in the decision.
1. Lower overall cost
Assume an employee that is “awarded” the honor of leading a business improvement project has a salary of $100,000 per year and the consulting firm charges $100 per hour. Let’s compare the key project metrics and cost drivers. This example also assumes the use of (1) employee only, which is highly unlikely.
| Factor | Employee | Consultant |
| Base Hourly Rate | $48.08 | $100.00 |
| Fully Loaded Hourly Rate (+30%) | $62.50 | $100.00 |
| Time to Complete Project | 8 weeks or 320 hours | 4 weeks or 160 hours |
| Utilization % | 50% | 90% |
| Total Organizational Cost | $40,000 | $17,778 |
The above example, although very simplified, demonstrates a cost savings of over 50% by hiring an outside consultant. The employee will take longer and will naturally not be able to dedicate all of their productive time to this specific project due to other workplace demands.
2. Less Organizational Liability
By utilizing internal employees, the organization subjects itself to a high degree of liability whereas by hiring a consultant, all, or a majority of the risk is assumed by the firm. These liabilities may take the form of the employee making costly mistakes, getting injured during the project, gaining of highly confidential information that may be released, and a failure to understand the external factors that may impact the project and outcome.
3. Skill Level
This is relatively straightforward. Although internal employees may have the abilities to manage these types of studies to completion, odds are that they do not possess the specific expertise, skill set, and experience levels to ensure a successful analysis. An outside firm most likely specializes in the type of projects they manage and can ensure the right combination of skills and experiences. In addition, the consultant knows exactly when additional outside experts are required and knows where these skills can be attained.
4. Time to Dedicate or Utilization
Let’s face it, internal employees will not be able to drop everything they are doing on a daily basis to focus 100% on the project at hand. As much as Senior Management believes that the employee is fully dedicated to the projects, they will most likely be consumed with other tasks during the project’s life cycle.
5. Unproductive Time
No one can work at 100% all the time. All humans require breaks in some form. An outside consultant will be fully dedicated to this project and this project alone. They will not be distracted by other tasks as it is their commitment to the organization to solely focus on the success of the study. Internal employees again will naturally yield higher levels of unproductive time due to time commitment, priorities, social activities and knowledge levels.
6. No Politics of Hidden Agenda
All organizations possess a certain amount of internal politics that can hamper a project. Whether it is the organizations culture, policies, procedures, management style or nature of the industry, these are very relevant factors to consider. The consultant will not be subjected to these political barriers and frankly will not care about them. They will have a task to strictly focus on and will not be affected by the political environment. They will not have time to “absorb” the culture but also must be able to fit into the organizational environment without being negatively affected by political factors.
7. Has Your Organizations Best Interests in Mind
Consulting firms need satisfied and loyal clients to be successful, not to mention they are liable for their actions as previously mentioned. Most internal employees, as dedicated as they may appear, will ultimately have their personal best interests in mind.
8. Step In, Make Adjustments, Step Out
Unless your organization would welcome the consulting team making your facility their permanent home, their time spent on your premises will be limited to the specific project cycle. The consulting firm will be time sensitive yet will make itself available for necessary follow up and if further changes are to be made.
9. Access to and Expertise in Specific Tools
This is one of the most critical reasons behind outsourcing your project needs. A consulting firm will possess the necessary tools and applications to make the project a success and will have the expertise in how to put them to use. Whether software applications, models, statistical tools, databases, etc., internal employees will need to learn how to effectively use these tools before they can even begin the study. Also, large capital expenses may be required to purchase these necessary tools.
10. Quality of Output
This factor relates to virtually all of the items discussed here. In the end, you will obtain much higher quality results than internal employees by combining skill levels, experience, dedication, access to tools, expertise, and political influence.
In summary, we have demonstrated (10) logical reasons as to why you would seriously want to consider hiring outside experts when embarking on that next large-scale project, whatever it may be. This list is by no means meant to be exhaustive. Did we mention that consultants tend to be less costly?
Some organizations are large enough that they may already have developed internal “productivity teams” or “project teams” but most firms do not have this luxury as human capital is spread thin and budgets are constrained. It is commonplace for larger organizations to hire permanent Productivity or Continuous Improvement Managers. These individuals most likely command top dollar yet can be huge resources for large companies with consistent needs to launch and manage ongoing projects.
Michael J. Green is CEO & Principal CFO Consultant of BPR Methods, LLC, a firm that specializes in Fractional CFO services to start-ups and small businesses. Mr. Green has 25+ years of business experience in senior level financial roles as well as a background in banking, operations, marketing/sales, and engineering. Mr. Green intentionally authors basic, straightforward, no-nonsense papers focusing on thought provoking ideas and concepts that can be applied in virtually an organization.
Please e-mail BPR Methods at info@bprmethods.com for more information.