Chapter 1
The Role and Importance of Internal and External Consulting

The beginning point of the journey described in this book is to reflect on the role and importance of consulting, from both the internal and external perspectives. At the same time, it is helpful to review the practices, changing expectations, and new requirements for these important areas. Finally, a snapshot into emerging trends and key success factors make this chapter a fitting introduction to this new book.

Trends in Internal and External Consulting

Both internal and external consulting have grown recently, and their importance continues to emerge. There is a natural evolution that makes consulting a logical solution for many situations. Also, there are a number of forces that have come together to make consulting a great choice for organizations and also as an occupation. While the drivers for growth in internal and external consulting have much overlap, some unique issues are emerging.

Emergence of Internal Consulting

The rapid rate of change coupled with heightened competition on a global basis is increasing the need for companies and public sector organizations to develop effective internal consulting capabilities. The development of this capability helps to better control overall consulting expenditures and obtain greater value for this investment. Internal consulting groups can support the development of key capabilities across the organization essential for future success in areas, such as strategic planning, project management, change leadership, and process improvement.

There are various areas across the organization that are realizing the importance of increasing their internal consulting skills to effectively provide services to their internal clients and developing more of a "business partner" role:

• One overall observation is that there is a new business model evolving regarding the emergence of more formalized and structured internal consulting service and their relationship with the external consulting resources with which the organization engages.
• The need to unlock the value potential of the total cadre of advisory resources spread across the organization is another key driver in the development of more formalized internal consulting capabilities. For example, most functions in an organization have a few internal consultants.
• Organizations are attempting to reduce staffing levels to keep their total employee count very low. This is driven by the desire to be efficient, and the employees on the payroll represent a fixed cost that can be very significant. Reduced staffing leads to opportunities for internal consultants to provide specialized assistance.
• Organizations and the work accomplished within are becoming more complex. This means that managers need help with a variety of work-related issues and processes.
• The continuing growth of globalization and fast pace of change requires specialized assistance with rules, regulations, culture, and change issues, creating opportunities for internal consultants.
• Outsourcing and shifting of transactional activities have created more opportunities for internal consultants. For example, in the human resources function, many of the activities are transactional (e.g., benefits administration, payroll administration) and they have been shifted to other functions such as finance and accounting. Other functions have been outsourced (e.g., help desks, training delivery). This leaves the HR function with a few generalists, often labeled HR advisors or consultants.

It is clear that internal consulting is not only a critical occupation in an organization, but one that is growing and adding tremendous value. From all indications, internal consulting will continue to grow and flourish and add value in all types of organizations.

The Growth of External Consulting

Consulting clearly is a growing occupation, at least among small consulting businesses. The following trends underscore its tremendous growth:

• In the United States, baby boomers are moving into their early retirement years. Many of them are seeking new challenges away from the bureaucratic structure of traditional organizations. Wanting to use their expertise and experience in a profitable way, they see consulting as a rewarding and natural next career.
• Shareholders of organizations increasingly demand more efficiency, profitability, and growth from organizations. This trend requires management to examine processes and work flow to ensure that organizations are the best that they can be. This, in turn, creates opportunities for external consultants who can assist in this important goal.
• Demanding customers are changing the dynamics of customer service. Organizations are constantly under pressure to provide the fastest, most reliable, and friendliest customer service. Consultants provide assistance in this vital area.
• Executives often require external validation of particular processes, products, performance areas, and outputs. External validation leads to the need for external consultants.
• Globally, there are many opportunities for consultancies as emerging nations eagerly seek to become more modern, up-to-date, and efficient in their processes.
• Demographic shifts in all countries are creating changes in market demands, creating opportunities for those who understand these issues and can help organizations meet these particular needs.
• The constant flow of fads in and out of organizations creates opportunities for consultants to help organizations address these trends and attempt to make them work in their organization. Some executives constantly seek the newest methods and employ consultants to help implement them.
• Executives sometimes prefer to use outsiders rather than rely on the input and advice of their own staff. They feel that the independence of the external viewpoint is important.
• In an attempt to become streamlined and efficient, some organizations outsource major parts of their work, creating opportunities for consultants. Often, these consultants come from the ranks of their previous employees.
• Executives and managers often have unpleasant tasks, processes, and issues to address. They prefer to use external consultants who are viewed as dispensable and can be quickly removed after the dirty work has been done.
• Finally, organizations, desperate to survive, seek all types of assistance and support to improve their situations. This creates many opportunities for consultants.

These trends and others create growth for the consulting industry. Depending on which estimates are used, the figures range from a growth of 15 to 25 percent per year for this profession. At the same time, the actual growth of large consulting practices is not as strong.

Opportunities for Collaboration

A key consideration for external consultants to develop their business in the long term is to explore ways to effectively partner with internal consulting groups and other internal support areas growing into that role. An increasing number of external consultants, from large organizations to sole proprietorships, are realizing significant opportunities to expand their business by working with internal consulting groups and other internals in that role. These partnering opportunities consist of various arrangements, including the following:

• Training on key skills and emerging methodologies
• Supplementing their expertise and research capabilities
• Providing additional resources for joint project activity
• Taking on projects for which the internals don't have the capacity or expertise

The important issue is that internal and external consultants are vital to an organization. Both groups are growing, and they must collaborate, as they can learn from each other.

Key Benefits of Building an Internal Consulting Practice

There are numerous benefits to the organization for developing internal consulting groups. Internal consultants perform a key role in identifying, prioritizing, and aligning strategic initiatives by participating in client planning sessions across the organization and helping to identify projects that will have maximum impact on overall performance going forward.

Internal consultants play a major role in facilitating proper implementation and continuous improvement by working with client teams throughout the project, helping to transfer ownership, and transferring needed skills for ongoing execution. Additionally, internals play an important role in building overall organizational capabilities by training and coaching clients participating in key initiatives and maintaining associated networks of expertise.

Effectively managing total consulting spend involves both controlling the overall cost of these services and helping to ensure the maximum benefit for that investment. This includes ensuring the necessary transfer of technology and methodologies to properly train the organization going forward.

Changing Role of Internal Support Functions

Internal support functions in a variety of areas of the organization are increasingly realizing the need to enhance their consulting skills in order to ensure their long-term viability and better service their clients. In a number of these areas, a new organizational structure is evolving to help improve the focus on the need to work more closely with clients and better understand their requirements. In this new structure, one...