I believe this question has to be answered up front when the engagement starts. The trick is clearly defining the result. If an owner or CEO believes that the result is a long term financial metric or strategic business performance issue, there could be problems. Obviously, a good consultant wants you to be more profitable and achieve your strategy. That said, there are no guarantees in life and success is not an entitlement. There is no magic formula.
Example of Defining Results
Let’s say that the company has a problem managing cash flow. A quick analysis of the data shows that Days Payable Outstanding are out of sync with the norm. Drilling down on this issue, we find that there are three main issues:
- The client is missing discounts due to slow paperwork
- Some vendors are being paid to early
- The overall profile of vendor terms is not favorable for good cash management.
It is tempting to engage a consultant and set a goal to reduce DPO from X to Y in N days. I do not believe a consultant should try to guarantee the result or the timeline on this goal. It sounds great, but chances are, the consultant would either be giving you an average of what they have done in the past, or a gut feel of what they think is possible. In my opinion this is not healthy nor is it fair to the client. There should be a DPO goal without question. However, there is not a DPO improvement switch in any system or organization I have seen.
A Different Approach
I believe a better approach is to set up some forward facing KPIs for the project and focus on getting tangible results against the KPIs. A forward facing KPI tracks an action or a behavior that is believed will achieve a certain result. Applying that model to this example, the engagement might have the following deliverables.
- The consultant will analyze, develop, and implement a new paperwork process for vendor invoices within 30 days. This paperwork process should make sure that 90% of vendor invoices are in the hands of Accounts Payable within 48 hours of receipt.
- The consultant will run a comparison of the terms listed on vendor invoices to the vendor’s account settings in the ERP system. The top 250 vendors account for 90% of the buying. No less than 65 comparisons will be run each week until the top 250 are all reviewed.
- The consultant will analyze the process for check runs in Accounts Payable and provide a recommended process that will help manage cash. These recommendations will be provided by {\[date].
- The consultant will analyze and provide the client with a list of the key vendors where negotiating extended payment terms would have the most benefit. This list will be provided by [date].
It is a Partnership
In cases where a business performance issue is at risk, it’s important to realize that the consultant and the client are partners. Forward facing KPIs allow the client and the consultant to reach an agreement about what drives the right business results. If we believe taking the four above actions will reduce DPOs and therefore improve cash flow, then we need to focus on accomplishing those things. If those things are achieved but the performance doesn’t improve, we know something else is wrong. We know we missed something, and need to look elsewhere.
The Answer
How long do consultants take to get results? With the proper definition of results, the client should know down to the day. Each project is different, and each timeline is different. That said, a client should know what they are going to be delivered and when it is going to happen. The key is understanding what a real deliverable is. It is equally important to know how it is expected to move the needle on business performance.
