Putting a value on management consulting projects is a complex business. Their wide range in size and scope means there can be no “one size fits all” approach when it comes to working out the benefits to a company.

What if the project is about not just increasing sales but adding greater value to the firm as a brand? It could involve improving internal business systems rather than simply installing a new computer system. Or building up a brand that will impact on sales over a longer period of time than the project itself. What should a client expect in terms of results and how can business contracts reflect this? “Consulting projects are notoriously hard to evaluate,” says Steve Varley, managing partner at Ernst & Young business advisory services. “The value in a project may not appear for six months to a year afterwards. Or never, if the project is new and experimental.”

“Quite often you have to get halfway before you really know what needs to be done,” admits Chris Price, head of public sector practice at Alsbridge, a boutique consultancy whose clients include Diageo, Nokia and Virgin.

“Evaluating projects is first about the project fitting its purpose,” says Jules Beck, director of business transformation for the consultancy Computer Sciences Corporation (CSC). “What is it you are trying to do? There is a huge difference between giving two months of strategic advice or carrying out a seven-year infrastructure project.” Or a 10-year project to deliver £250m of cost savings at Royal Mail, which CSC is working on, or a recent project it carried out to “bring to life” the National Grid brand name.

Clients should work out why they are using consultants in the first place, says Price: “Is it to plug a skills gap for a limited period or maybe it is to get another opinion? When you have worked out what your requirements are, then you have to set out what you intend to do and you can work out the milestones of all the important variables such as cost, quality and time.”

Clients should expect to have a clear idea of what is to be carried out, why and how this is to be measured. If direct financial benefits will not become apparent for a while, then “leading indicators” are used to show that they are on their way. Examples of these are more customers in a store, an increase in visitors to a website or greater brand recognition.

CSC recently worked on installing new communication systems for the NHS. “We are paid according to the value we create, such as how many healthcare professionals are using the system,” says Beck. “By definition of the fact it is being adopted, value has been created.”

As part of the process, clients should expect to have continuous discussions with the project managers, making sure value is created or assessing whether expectations need to be reset. “It is worth measuring it, writing it down,” advises Varley. “In six months’ time when you are looking back, the clients can forget what has happened.”

Clients should expect to have a say on who works with their business. The personnel employed on your project can be of vital importance. “Clients have come to realise that the key determinants of the success of a project are the individuals on a team,” says Beck. Previously, the consulting firm would pitch for a job and then pick the team who would carry it out, he says. “Now there has been a sea change and it is seen as a joint responsibility,” he adds.

“Clients are happy to veto people if they don’t fit.”

Businesses using consultants will often want to see all the individuals who will be involved and then make the buying decision only if they are assured that the key staff will stay on the project for as long as necessary. It can prove a big challenge for management consultancy firms to decide where to place its “talent”.

Beck says that talent management takes up a huge amount of his company’s time: “Our people are a scarce resource and it is difficult to devote them entirely to a project, but the companies that will win are the ones that are able to meet that need.”

The complexity of evaluating projects is reflected in the varied nature of contracts between clients and consultants. Consultants are moving increasingly into the risk/reward arena, which means that if certain targets are not achieved, the consultant forfeits part of the fee for the project. On the same basis, if the agreed targets are overachieved, then the consultant is rewarded.

Joint ventures, in which risks and rewards are shared by the various elements of a project or limited companies are set up to bring together those involved, are becoming more popular. “There are multiple ways of doing this,” says Beck, “and the really good consulting firms can deal with these different types, often with the same clients. It’s about having a flexible cultural ethos, how good you are at managing the commercial risk and your intimacy with clients. Do they like innovative ways of measuring value or would they prefer more traditional fixed-price contracts?” “We are happy to share the risk if we also share the rewards,” says Varley at Ernst & Young. “You can’t have the risk without the benefits of the upside too.”

We came, we saw

SHEFFIELD-based Spear & Jackson, Britain’s oldest tool manufacturer, turned to the consultancy firm Propaganda to help it turn around its loss-making wood saw division.

After extensive market research, Propaganda came up with the Predator, a hard- wearing saw that improved speed — but at double the price of its competitors. The task was to persuade a traditionally minded industry to accept it.

All Propaganda divisions were involved in the process, from product design and packaging to marketing and promotions. Backed by a trade advertising campaign, the project was completed in six months, from research to a full launch.

Against a first-year target of 30,000 units, Spear & Jackson sold 38,000 units within the first 16 weeks and more than 200,000 units in the first year. The firm’s wood saw division increased its turnover from £675,000 to £1,765,000 within a year and now hopes to turn over nearly £3m in its second year.

An extra £350,000 was invested in additional plant and equipment to meet demand for the Predator, while Spear & Jackson’s market share has grown by 10%.

Propaganda received a flat fee for its input.

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