(Public Spend Forum presents the second in a series of guides to buying professional services. You might also be interested in Buying Professional Services – A Guide To Getting Value From The Experts, by Fiona Czerniawska and Peter Smith, published by the Economist Books and available here or here).
Professional services, incorporating management consulting, legal services, audit and other related services, is one of the largest “master spend categories” now for many private and government sector organisations alike. In the first part of our series, we looked at the five key challenges that make this also one of the most interesting and challenging categories most procurement professionals will face.
Today, we will look at why organisations purchase professional services, and identify three key drivers for most engagements of this nature. It is vital that buyers understand which of these motivators sits behind each professional services procurement need if the selection of suppliers and contracting process is to be successful from a performance and value perspective. At the highest level, there are three reasons why suppliers get engaged.
- Expert Knowledge
This is probably the most obvious driver and the reason behind many professional services engagements. Knowledge is the basis of a professional services firm: if you ask a client why they engaged a firm, this is high on most lists – “they know stuff that we don’t know”. Such knowledge comes in several forms, although it is of course possible that the requirement may be for more than one of these three areas:
- Technical know-how: firms and their people may have understanding of specific rules, laws and regulations. They will have studied, and have to maintain a minimum level of continuous professional development. Organisations use this expertise when they lack it themselves or where they need a second opinion.
- Solution know-how: Similar to technical know-how (and many confuse the two), but less formalised and therefore harder to evaluate. An example here would be a consultant’s knowledge of supply chain management: this is a specialised field and the consultant would need to be thoroughly grounded in how distribution systems work, inventory management, and so on. They might even have a Master’s degree or a diploma. But there is no single set of rules to learn.
- Market know-how: In some cases, it is the knowledge of the client’s sector (or perhaps one it wants to enter) is vital. Public sector organisations are audited differently to private sector ones;; clinical trials by pharmaceutical companies are tightly controlled by regulation. Market know-how is also important when the exact solution the client is looking for is not clear.
- Intellectual horsepower
If “expert knowledge” is about the firm or individual within it “knowing things” then this is about an ability to “think about things”. Often, even if some of the specialist skills are sought, a client is also looking for advisers to solve problems, to think creatively, perhaps to spot unnoticed threats or opportunities. This can take different forms, but it is quite distinct from the specialist skills we discussed earlier. However, as with specialist skills, intellectual horsepower is not just related to the individual; it too, is often closely connected to the corporate characteristics of the firm the adviser works for. The three major sub-categories here are;
- Independence, creative thinking and problem solving: A consultant might know how to analyse spend data, or a lawyer may know all about EU or Federal procurement regulations. But the ability to think creatively about what this means to the client and come up with relevant and creative solution is what distinguishes an average adviser from a great one. Some of the skills here can be learnt; but some come naturally to certain people but not to others.
- Facilitation and communication: Clients do hire advisers for these skills. It might be literally facilitating a difficult meeting or a vital workshop; or it might be more subtle, perhaps working with a senior team to come up with a solution where the difficulty is not intellectual, but getting buy-in from very different people.
- Information and analysis: Sometimes it is this that matters. The adviser and the firm may have benchmarking data collected from past clients; or a unique process; or analysis of recent economic and market trends. In many cases, big firms lead here; but some smaller specialist firms can have their own areas of deep capability here.
As with specialist skills, these qualities are not mutually exclusive, but they do stem from different sources: the attributes of individual adviser; breadth of experience in the marketplace; a firm’s collective intellectual capital.
- Execution and implementation
One of the most significant trends in professional services over the last decade has been the shift away from pure advice into implementation – “doing things”. A firm like Accenture that started in consulting now generates more revenue form “doing” rather than “thinking” or “knowing”. In its most extreme form, this becomes outsourcing, when the service that is being provided steps becomes pure implementation. These are the drivers though when such work falls short of that extreme.
- Speed: A professional services firm can get people working very quickly to focus on a specific issue or opportunity – more quickly in many cases than can be achieved internally. So professional advisers can help to accelerate processes. In many cases, the organisation could have done the same thing themselves; eventually!
- Energy and momentum: A client may look to professional advisers to ensure that a project, once started, is finished rather than just fizzling out as so many do. External advisers can dedicate all their time and efforts to this one project, whereas employees of the client organisation usually have other responsibilities to distract them. Advisers should be capable of being “change agents” in most of the work they do.
- A road map: Organisations may have sufficient knowledge and information to know what it is they want to do, but they may lack the wherewithal to convert their idea into reality. They need their professional advisers to provide a road map, a plan they can follow.
So, if we understand these three drivers, we can start to think about what we are looking for when we go to market to find a professional services firm, how we might construct frameworks or individual contracts, and generally how we can get good value from these markets. We will have more on that in part 3 of our series.
(To be continued)