In the first installment of this rant, I began to offer my scattered thoughts on why you should never hire one of the strategy consultancies to oversee a tactical procurement or sourcing study, let alone a sourcing transformation. I'll list some additional reasons below, including many of which I've personally lived or seen over the years. I'm sorry for the laundry list of items, but with apologies to my first manager in consulting, there is no 80/20 rule for describing why it's best to keep strategy firms as far away from your spend as possible. All the reasons count equally, I'd say.
- Fees. Strategy firms are expensive. Very expensive. They're relationship-driven, which is invaluable for corporate strategy, and it would be silly to negotiate their $5K+ blended rates for truly corporate strategy initiatives that touch at the very heart of board-level work and company DNA. They can absolutely be worth it here. But for sourcing and operations work, there are plenty of (even larger) firms with blended rates that are 30-40% below. Don't pay a premium here. You simply don't need to.
- Technology and solution understanding. I don't care what they may claim or about the former CIO technologists that they've made partners on staff. Firms such as McKinsey, Bain and BCG simply don't have the procurement systems knowledge of an Accenture, Deloitte, IBM, Capgemini, PWC or even an AT Kearney for that matter. I can tell you exactly what strategy firms do when they need to sound smart on systems: They hit our sites (and others) and download as much free (or inexpensive) reports as possible. Then they consult their Gartner and Forrester agreements and their shared services knowledge management teams in India (if they have them) to dig up as much as possible. Then someone who likely has never installed a system (or seen more than a handful of demonstrations of tools in the sector) attempts to synthesize recommendations and creates a scoring mechanism that looks sharp. The strategy firm might end up selecting an optimal systems approach based on a cool framework and (hopefully) informed third-party research amalgamation, but the recommendations often lack empathy for how tools work and how they will need to be applied and integrated (technically speaking, socially and process-wise) in a given environment. Even though we're biased here, it's our collective view that systems are critical for procurement and that any consulting firm working on a project that touches procurement DNA should have an appreciation learned from years on the job, observing what works in practice (and does not).
- Realized procurement savings requires operational know-how and getting dirty with the business and suppliers past the numbers. The best way to solve our national debt crisis would be to take the identified (but not implemented) savings numbers that consultancies have found in procurement and supply chain, somehow magically make them real, and apply them to the government's obligations. One could write a book – many books, really – on this topic and all the case studies of savings that companies have failed to implement after strategy firm studies. These work perfectly well in an academic setting, but they fail the reality test for one reason or another (e.g., "we can easily get 75% of suppliers to go for an early-payment discounting program.")
- Talent and expertise. When strategy firms want operational and procurement talent, they typically hire expertise in a scattered manner, often at the top or middle management. But it's the analysts and associates who do most of the work in projects (typically young university and MBA recruits). Just because a firm parades in a partner or senior manager who seems to "get" your problem and industry nuances, it's unlikely those on the study will have had more than a year of experience (if that) doing actual procurement work with the battle scars (and lessons learned) to show for it. It also happens that because of the often-associated upsides with such projects (contingency, mixed fee models, etc.) that firms will toss a lot of bodies at the problem (the thinking being that more brains equals more identified savings which equates with more revenue) rather than choosing the right nimble team to get the job done right.
- Project team enthusiasm. Let's face it. Strategy consultants, especially those who are relatively fresh out of school, were likely cajoled into joining a firm based on the experience they would gain doing corporate strategy work focused on M&A, top-line growth, new product introductions or something similar. Few thought they would be drafted into procurement and supply chain so quickly (we all know what pays the bills). Don't discount the notion of a project team that has poured everything into a project because they're passionate about the topic versus those just going through the motions and collecting frequent flyer miles.
It's my admittedly cynical view that despite the thought leadership they continue to crank out and despite the average brilliance of their consultants, typical strategy firms aren't the right answer for procurement and strategy advisory and implementation challenges. Turn to those with dirt under the nails. If I were you, I'd sooner want someone from Wharton, Texas, with a dozen years of experience and soft company hands, than someone fresh out of the other Wharton we all know working with my spend.