Do consultants really help?

A survey suggests that India Inc is ambivalent about their utility.

None of the 29 corporations on our list have hired less than one consultancy firm since 1995 - the year the impact of economic liberalisation started to kick in.

You will also find that almost all these corporations - which we have chosen to represent a diverse range of industries - have hired at least one of the Big Six (Accenture, BCG, E&Y, KPMG, McKinsey, PwC). Overall, 90 per cent have turned to global firms for help on a wide range of issues.

Now look at the ratings these companies have given to consultants. Only three have rated them above 8/10. The majority are content to mark them between 4 and 7. Not bad, but not great.

Surprisingly, too, few companies actually implemented the advice they spend lakhs, even crores to aquifer in toto.

It is clear that consultancies have a significant perceived utility. As Amar Raj Singh, managing director, GuinnessUDV, puts it, "Every company needs the fenders of a Volvo, engine of a Mercedes and the looks of a BMW. That is why they hire consultants."

So why this ambivalence? And what are the issues companies face when they work with consultants? The comments set out in these tables are intended to answer these issues.

Let's look at why some firms have rated their consultants' advice so low. Consider Blowplast, the Rs 236.66- crore luggage manufacturer, which has hired as many as six consultants, two from the Big Six. Blowplast has given the advice it received a low rating of 4/10.

The reasons a senior Blowplast executive offered for this may not come as a surprise. They were: (a) many issues that consultants point out are already known; (b) changes in top management leads to a change in perspective that, in turn, leads to partial implementation of consultants' advice.

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The implication is that success is often a factor of a corporation's receptiveness. For instance, the RPG group, the only conglomerate to rate its experience a perfect 10, has commented that consultants' advice is "useful if the organisation has the ability to absorb the knowledge."

Flexibility in managerial thinking is a clearly a key factor in maximising consultant advice. R Gopalakrishnan, executive director, Tata Sons, the group holding company, points out that, "If you have a predetermined idea that you hope a consultant is going to mouth for you, do not get a consultant."

It follows, therefore, that much depends on the nature of the relationship between management and consultants. "Chemistry is a very important ingredient for the success of projects," says R R Ramakrishnan, executive director, Bajaj Electricals.

"Projects go beyond expected results if there is a good rapport between the project leader from the client side and the consultancy."

Adds Harsh Goenka, chairman, RPG group, "Consultants must not treat companies like customers. Both need to be on the same side."

Goenka points out that the mismatch between expectation and results can often be a function of perspective. "If consultants are compensated based on results then they are being rewarded for short-term performance while most companies get gains in the long term," he points out.

Ultimately, as a Reliance Industries executive bluntly put it: "Consultants are not god."

Additional reporting by Gouri Shukla