Brian:
This is something I was interested in researching which is, how do you put a value on your time or level of work being conducted as a consultant? Another cost that should be considered would be cost, direct or indirect, project design and development, and other expenses. Some of the challenges would be to stay within the allotment of the budget based on the needs of the project. How do you calculate your time and value to the project into the budget? It’s essential to keep in consideration that the client receives a return on its investment in the consultancy services. According to (Robinson et al., n.d.) the ROI of a performance consulting initiative is frequently referred to as the ultimate measure of success.
Companies could appreciate the value of consultancy services which would play a role in the cost of the consultancy services. To determine the ROI the monetary value of the benefits from the initiative and the cost of the initiative is required (Robinson et al., n.d.). To identify the cost, it would be important to have a clear understanding of the problem and solution. Also, be able to sell the value of the results to the client. According to (Robinson et al., n.d.) it is essential to have strong evidence that the improvement in business results is due to your performance consulting initiatives.(Robinson et al., n.d.) also states the importance of having the effects of the solutions to the client’s needs.
A consultant can assist with developing competencies within an organization with research and observation. Reviewing the client’s current processes and also conducting focus groups or questionnaires to get some feedback from the employees. With this data being collected it would give the consultant directions into what development or improvements are required for the competencies of the organization. With these competencies collaboration with Human Resources would be important. According to (Strobel & Kurtessis, n.d.) HR expertise serves as the driver of behavioral competencies, such as Business Acumen, Critical Evaluation, and Consultation. A change in leadership and coaching would be imperative for the employees. According to (Rosen, 2018) countless studies detail the impact that effective coaching has on performance, productivity, attitude, employee engagement, and company culture. Data isn’t going to help you create a coaching culture, but it clearly shows that you need one (Rosen, 2018).
References
Robinson, D., Robinson, J., Phillips, J., Phillips, P., & Handshaw, D. (n.d.). Performance Consulting: A Strategic Process to Improve, Measure, and Sustain Organizational Results. Retrieved December 9, 2023, from https://web-s-ebscohost-com.saintleo.idm.oclc.org/ehost/ebookviewer/ebook/bmxlYmtfXzk0MTM1OF9fQU41?sid=9981c9fe-9816-4c1b-8e89-6fba163e07bd@redis&vid=0&format=EB&rid=1.
Rosen, K. (2018). Sales Leadership: The Essential Leadership Framework to Coach Sales Champions, Inspire Excellence, and Exceed Your Business Goals. John Wiley & Sons, Incorporated. http://ebookcentral.proquest.com/lib/saintleo/detail.action?docID=5516186
Strobel, K., & Kurtessis, J. (n.d.). Defining HR Success: 9 Critical Competencies for HR Professionals. Retrieved December 9, 2023, from https://web-s-ebscohost-com.saintleo.idm.oclc.org/ehost/ebookviewer/ebook/bmxlYmtfXzEwOTA3MjNfX0FO0?sid=3ed54270-0c08-4281-be6e-13002b30be01@redis&vid=0&format=EB&rid=1.
Patricia:
Measuring the return on investment (ROI) on a consulting project is essential as it places a value on the payoff of the project. Monitoring the consulting costs is one step in developing the ROI calculation since it represents the denominator in the formula. When these costs are combined with the monetary benefits, the ROI can be fully developed (Phillips et al., 2015). It is important to monitor costs in an ongoing effort to control expenditures and keep the project within budget. By monitoring cost activities, consultants will know the status of expenditures, have visibility to expenditures, and influence team members to spend wisely. It is much easier to monitor costs in an ongoing fashion, more accurate and more efficient than the alternative of trying to reconstruct events to capture costs retrospectively (Phillips et al., 2015). The two common measures for calculating ROI are the benefit/cost ratio and the ROI formula.
ROI Measures
The benefits/costs ratio (BCR) is one method for evaluating a consulting project. It compares the monetary benefits of consulting intervention to the costs, using a ratio. The formula equals monetary benefits/consulting costs. For simplicity, the BCR compares the annual economic benefits of the consulting project to the cost of the project (Phillips et al., 2015). A BCR of 1 means the benefits equal cost and no value was added while a BCR of 2 indicates that for each dollar spent on consulting, two dollars are returned in benefits.
The most important formula for evaluating consulting investments is perhaps the ROI formula: net benefits divided by cost (Phillips et al., 2015). The ratio is expressed as a percentage when the fractional values are multiplied by 100. It is equal to (net monetary benefits /project cost) x 100 where net benefits are consulting benefits less costs. A consulting ROI of 50 percent means that costs are fully covered with an additional 50 percent of the costs reported as earnings.
Captured Costs
In consulting, some costs are hidden and never counted. Capturing costs is challenging because the numbers must be reliable and realistic. Therefore, it is a best practice to take the conservative approach and account for all costs, direct and indirect. Phillips et al (2015) referred to this as a fully loaded cost but from a practical standpoint, some costs may be optional based on the organization’s guidelines and philosophy. Direct cost is easily developed while indirect charges are more difficult to determine. The major costs are known upfront, however, the hidden costs to the organization that are linked to the project are not detailed. This lack may lead to developing an unrealistic ROI resulting in costs that are incomplete and not credible (Phillips et al., 2015).
Challenges
A challenge consultants face is deciding which costs should be tabulated and which should be estimated (Phillips et al., 2015). In a fully loaded, conservative approach, there are four categories for estimating costs. First, some costs should be prorated from one consulting project to another as they serve other purposes rather than just the current consulting project. Second, direct charges are considered substantial costs and are the largest costs for most projects. Third, expenses absorbed by the consulting team are charged to the project. These are traditional costs in consulting and should be kept to a minimum. And fourth, are costs to the client due to their involvement in the project, especially in the initial analysis and assessment phase. Costs are incurred throughout all phases of a project. Some of the initial cost items included in the ROI measures are costs relating to designing and developing the solutions for the project, acquisition costs, and capital expenditures. Costs relating to the application and implementation phase are also included. Namely, salaries and benefits for consulting time, those for coordinators and organizers, participants’ salaries and benefits, consulting materials and supplies, travel, lodging and meals, and the use of facilities. Additional costs include maintenance and monitoring, administrative support and overhead, and evaluation and reporting costs. Whatever costs are included, they must be defined, and critical cost issues must be explored to prevent problems later (Phillips et al., 2015).
Another issue consultants face is to develop specific values that reflect the ROI. A fundamental concept and a generally accepted practice for developing ROI is to annualize values (Phillips et al., 2015). This is most impactful in the first year of a short-term project since many short-term projects have added value in the second or third year. For long-term consulting projects, first-year values are inappropriate and longer time frames need to be used.
Advantages of ROI
The are advantages of the ROI process despite the challenges mentioned. The process measures specific consulting project contribution, develop priorities for projects that add the most value, provides a variety of data to make adjustments and changes, focuses on results, and allows management to see a consultant as an investment, not an expense, etc. (Phillips et al., 2015).
Competencies Development
There are many ways consultants can assist management in the development of competencies. A major one is in change management. Consultants can assist in the smooth transitions of a change and ensure employees are guided through the journey (www.pulse learning.com). They can do so by (1) clearly defining the change and aligning it to the business strategy, (2) determining the impacts and those affected, (3) developing a communication strategy, (4) providing effective training, (5) implementing the support structure of which includes various elements. Some of these are: describe how to build buy-in from all affected stakeholders, describe how to handle resistance, describe the evaluation and exit criteria, and how to monitor, control, and report status, etc. (Kemp, 2023), and (6) measure the change process. Throughout the process, consultants should measure the business impact of the change and evaluate the change management plan to determine its effectiveness. It is a best practice to document any lessons learned while asking key questions such as, did the change assist in achieving business goals? Was the change management process successful? What could have been done differently? etc. (www.pulse learning.com).
References
Kemp, T. (2023). Change management plan.
Phillips, J., Trotter, W. & Phillips, P. (2015). Maximizing the value of consulting: A guide for internal and external consultants. Somerset, NJ: John Wiley & Sons. ISNB: 978-1-118-92310.5
https://www.pulse learning.com. Six steps to effective organizational change management | PulseLearning