Why do great companies all hire cost saving consultants?

In a competitive world, with very civilized yet cut-throat competition business understand that the slightest let up in managing their finances can result in them rising or drowning in a flash. Neither their suppliers nor consumers are willing to cut them a slack, each wants to milk the other for more value at less price or effort. Government mandate and labour laws have only become more stringent than before. Although, there might be overall no dearth of talent at a global scale at local levels, finding the right talent remains an expensive proposition. The recruitment costs are always skyrocketing and employee retention is dwindling. In such a world, how big business survive?

They resort to a multitude of strategies to breathe, survive or even expand through all the market chaos that persists. Saving costs or reducing their expenses to a minimum remain a major effort or focus of such strategies. They go to the lengths of even contracting third-party cost reduction consultants, in some cases firms across the other side of the world, simply to analyse and point out where and how much they can save in their mammoth corporate structure. By doing this they can gain a large amount of profit.

These efforts are resisted at some levels within the organization. Especially by those who are intimated with the idea of an outsider telling them how to run things. It is quite a normal human reaction to resist change in general. Only, in this case, it gets blamed on some guy by demonizing them as “outsiders” or “job killers”. In fact, some of it may be justified as the recommendations made by the expense reduction consultant and may lead to a certain amount of “shedding” or “cutbacks”. These terms bring widespread dread as these just mean a lot of people lose their jobs as sometimes, entire departments, functions or company divisions are “fired” or let go.

But still why not do it in-house Why call in people from outside to do your dirty laundry. This is why:

Outside Opinion: When going gets touch we turn to our friends or more experienced relatives or acquaintances for advice. The corporation does quite much the same. Another reason for them calling in a consultant may be that they aren’t sure if the course of action they have decided upon is well sound. They’d call in an outside expert for a fresh opinion.
Especially, when it comes to saving costs, a third-party consultant might spot what they might have missed in their analysis. A cost consultant has years of experience behind them to go over and not miss anything that can be managed or reduced in terms of cost.

Manpower Crunch: Although, most firms big or small have an accounting division dedicated to that function, yet not focussing entirely on cost reduction. Any attempts to deploy additional resources to do even a cost reduction study could undermine day to day operations of the firm. Also, there’s an inherent or resistance to change which may be expected from the employees asked to review their own accounting practices. Hiring more full-time employees to do a study or cost reduction exercise is, again not very fruitful as hiring a full-time employee for a one-off, one-time exercise makes no sense. Not to mention it adds up as a dispensable cost incurred on account of poor judgement.

Expertise: The most compelling reason perhaps is the highly coveted expertise of the consultant acquired over years of doing the cost analysis and reduction exercises across organizations and Industrial sector. The hiring organizations save on years of training and hassle employing outside talent, instead of investing in developing it in-house for a one-off event.

Blame Shift: A consultant can only recommend, whereas it’s up to the management of the hiring organization to implement those recommendations. Especially when tough or controversial decisions have to be taken and the middle management is not up to it or doesn’t have the guts to do it, consultants are called in. As an added plus, if things do go wrong as a direct consequence of consultant’s actions, they can be blamed, absolving the hiring master of everything.

The consultants are aware of these risks and this mentality but they choose to operate regardless, often in hostile conditions among sometimes rude to uncooperative employees, because they think that this is part of their job to deliver, none the less, none the less. This attitude has become the hallmark for consultant success stories and contributed to their impeccable reputation and professional shine. I think this is the best way for them to be competitive.