4 Surefire Ways to Determine If Your Management Consultant is Delivering ROI

I think the current trend of “dollarization” in business decisions – that is, finding out exactly what each purchase or investment should bring back in terms of new revenue or decreased costs – is a great thing. After all, the name of the game has always been to bring in more money than you’re sending out, and that’s something you can never do too precisely. But, I also think that the practice has led many managers and business owners to make two key mistakes when it comes to bringing in management consultants: choosing not to use them at all, and neglecting to figure out the ROI of the investment in the first place.

It’s easy to understand the confusion; consultants work in an abstract industry. What they do can’t always be measured, in terms of a financial return, the same way the new machine or financing program can. But, that’s not to say that you can’t find clues about what you’re getting (or are going to get) from a management consultant.

The first mistake is deciding not to hire them at all. Just because you’re having trouble calculating the benefit of having someone come in and take a look at your company, it doesn’t mean there isn’t a benefit to be found. There’s big value in having someone from the outside come in and take a look at the way you’re doing things. Getting a new perspective can almost always help you find areas to improve, especially if it’s from someone who knows a lot about your business or industry.

The second mistake is failing to figure out the return on investment at all. Just because a consultant’s impact might not be felt right away in the profit and loss column, you shouldn’t stop looking for it altogether. Otherwise, how do you know that you’re getting anything for your money?

One good idea is to keep track of your department’s performance in the consultant’s area of expertise over a six month or one year time frame. Often, an outsider can come in and motivate your team for a couple of weeks, but their effect fizzles out after that. A quality program, however, should show steady gains (be they in sales, marketing, customer service, or some other area) over a prolonged period of time. What you want to do is find out if you’re accomplishing more after your consultant came in than you were before. The only way you can do that is by keeping good records.

Or, if you haven’t worked with consultant yet, check out some of his or her past clients. Find out first what they thought of the program they received, and whether their overall impression was that it was worth the money. If you get a favorable response, try moving to more specific questions. Find out whether sales increased, or if costs went down. Often, past clients won’t have this information at their fingertips; but, by asking about it yourself, you may just spur them to take a closer look. As you go through this process, try to look beyond the obvious and consider the whole picture. It would be easy, for example, to conclude that your sales management consultant did a poor job if your producers weren’t doing as well now as they were six months ago. But if the rest of your industry is selling even less, it might have been a good investment after all.

With that in mind, here are just a few surefire ways to measure the return on investment from a management consultant:

1. An increase in sales: For many companies, the goal of hiring a consultant is simple: sell more than they were before. If this is your aim, then compare your sales, overtime, by person, product, and so on. You should be left with the clear indication of how your consultant really did.

2. Changes in employee turnover: Losing team members is always bad for business, not to mention incredibly expensive. A management consultant who helps your team work together – and stay together – could save you hundreds of thousands of dollars in just a few years, so keep an eye on these figures.

3. A decrease in customer service costs: Lots of businesses end up refunding a good chunk of their profits because they have under-trained customer service staff, or other personnel in the company who can’t handle problems in a timely way. Bringing in someone who can help you on these expenses is a good investment, but you’ll need to monitor the numbers to make sure you’re getting your money’s worth.

4. More productivity: Topics like time management and goal setting seems so straightforward that many companies hesitate to pay a consultant to work on them. And yet, improvements in those areas can have some of the biggest impacts on the bottom line. These are tricky topics, though, because they are so vague. The next time you hire an outside consultant to work on these issues, be sure you have a plan in place to follow up and monitor the results.

Obviously, these are just a few of the areas that a skilled consultant can help your company, and you could probably think of dozens more. No matter what their particular topic or expertise, though, make sure you know where your expected ROI is, and then find out if those gains are translated into hard numbers. A management consultant can be a great investment, or a complete waste of time and money, but you’ll never know the difference unless you track the results the same way you would with any other business expense.