Who reads this blog? 10 survey results

Thanks for reading this blog.  I have enjoyed your company and comments.  Hope you find this stuff – not so boring – and potentially helpful.  Some survey results which hint at http://www.consultantsmind.com readers.

  • 70% are management consultants
  • 54% are grinders, 34% are minders, and 7% are finders
  • 50%+ use excel daily for analysis
  • 67% said a PowerPoint was their last deliverable
  • 59% had not heard of Tableau until reading this blog
  • 83% said that meetings are not useful 50% of the time or more
  • 44% rated their accounting literacy poor, only a 1 or 2 (out of 5 total)
  • 18% rated their relationship with their boss excellent, as a 9 or 10 (out of 10 total)
  • 30% consider themselves good conversationalists, self-assessed as first quartile
  • 42% read The Economist weekly, good job team

Consultantsmind Are you a consultant

Consultantsmind What is your role

Consultantsmind How often do you use excel

Consultantsmind Last Deliverable

Consultantsmind Tableau

Consultantsmind What percentage of meetings are useful

Consultantsmind Accounting literacy

Consultantsmind Relationship with boss

Consultantsmind Conversationalist

Consultantsmind Economist

As with all surveys, caveats apply.  The same size is small (usually less than 100 people).  The people who respond to surveys are not necessarily the average reader, but instead someone who is engaged . . . willing to “click” on an answer.  Nonetheless, I like the profile of my readers and get encouraged from this information.  Read on.

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Consulting tip: Read the Economist

Consultantsmind Economist Logo

I have been reading the Economist since 1991.  So many reasons I like the magazine:

  • Clear thinking, clear writing
  • International in scope; not America-centric
  • Libertarian thinking, but not “gold standard” fundamentalist
  • Opinionated; strong point of view
  • Witty (British, after all)
  • Takes the long view (more trends and root causes, than hype and gossip)
  • Eccentric (this week’s had Iranian cars and programmable furniture)
  • Practical; the articles break wherever they need to . . sometimes they run only 4-5 sentences on the next page
  • Focused on education; the science section explains crazy-difficult things simply
  • Researched and authoritative; they back up all their arguments
  • No writer bylines – writing for the Economist, is almost fame enough

Many of the articles are for free here, also, they have almost an hour of free podcasts weekly here.  Give a read, give a listen.  Worth your time.  As Larry Ellison said, “I used to think, now I just read the Economist”.  Here are some great graphs from their blog:

In 1985, at its height, IBM was 74% of the tech sector market cap.  Holy smokes, that is complete domination.  Tech has become completely democratized; now if you add up Apple, Google, Microsoft, Facebook, and Oracle it is less than 50% of the technology market.  Play with the interactive graphic here.

Consultantsmind Tech Sector IBM

Then you should look at the graphic in terms of real dollars.  The domination of IBM at that time was only a market cap of $178 Billion, which is peanuts compared to the $3.7 Trillion that the total sector looks like below.  Also, notice how the market is approaching the overall market cap at the bubble in 2000.   Uh-oh.

Consultantsmind Tech Sector IBM in real dollars

How golf has changed.   The winning score at the British Open has fallen from 360 to less than 280.  The Economist notes here that they had it much worse then:

  • Greens were tended by sheep, not mowers
  • The prize was about $1,000
  • The clubs were warped wood
  • The balls were either leather balls filled with feathers or Malaysian sap

Consultantsmind British Golf - Economist

Refugee crisis continues.  Seems like there is always war, regional hatred, and essentially people behaving badly, and dictators living up to their horrible reputations. Look at the # of refugees by country of origin over last 35 years here.

  • Afghanistan consistently had 3-5 million refugees
  • Syria is the highest # of refugees in 2014, all of a sudden

Consultantsmind Economist Refugees

India’s (improving, but still troubling) poverty

  • 30% of India’s children are underweight
  • Big disparities by state for malnutrition and other factors
  • The UNICEF effort was massive – involving 210,000 interviews; links to the complete article here

Consultantsmind Poverty in India

Chinese and Indian immigrants.  The composition of US immigrants is changing here.

  • Chinese and Indians are outpacing the number of Mexicans immigrating
  • One-third of foreign students are Chinese
  • 70% of H1B visas for highly skilled workers are going to Indians

Consultantsmind Economist Immigrants

Illegal Drug Websites. As shown below, when illegal drug buying websites (Silk Road etc) are shut down, new competitors take its place here. It is the free-market argument that SUPPLY will always follow DEMAND.  You can’t chase down the suppliers of things you don’t like (e.g., prostitutes, drug dealers, pornographers, illegal alien laborers etc), you have to go after the demand (e.g., those hiring prostitutes, drug users etc).

Consultantsmind Economist Illegal Drug Sites

Curious how many of you read the Economist with some regularity.  Click on the survey.

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What is return on equity (ROE)?

ROE (return on equity) is one of the key formulas that most MBAs (yes, including Marketers) remember learning on their path to financial literacy.  It is often the best FIRST place to start for financial statement analysis.  In simplest terms, it tells investors what kind of % return they are getting on their invested money.  Higher the better.

If you only learn a few financial metrics, this is one of them.  The formula is simple and worth your memory and understanding: ROE = Net income / Shareholder Equity

  • Net income = bottom line on the income statement (revenue-expenses)
  • Shareholder equity = Assets – liabilities

ROE is beautifully simple and worth knowing.  For many reasons:

  • It factors elements from both the income statement and balance sheet
  • It applies to all companies and industries  (caveat on this point later)
  • It can easily be broken into component parts for further analysis

I prefer the DuPont formula.  This is another way to articulate ROE.  Yes, it is named after the chemical company – which apparently starting using this ROE approach in the 1920’s to drive their financial planning and decision making. Their approach is very reductionist and easy to follow: ROE = ROA (return on assets) x leverage.

It starts with ROA.  Seems like common sense, but getting a good return on your assets is the heart of any business.  You have assets (people, plant, equipment, intellectual property, real estate, investments) and you need to get a return.  For a consulting firm, projects need to be profitable (client billings > consulting salaries) and the consultants need to be fully utilized.  Like the table shows below, the firm needs profitability  & operational efficiency.  ROA can only be high if projects are profitable and consultants (assets) are fully utilized.  If consultants are on the beach, ROA falls.

Consultantsmind DuPont Model

Leverage helps.  This may be counter-intuitive to those not finance-minded, but the more debt you have (other people’s money), you make a higher % return because you get the same net income (profits) with less of YOUR money invested.  Same money out, LESS of YOUR money (equity) invested. OPM = other people’s money.

Using the simple example below, let’s assume you buy two identical houses for $100K each.  You get annual profit (from rents) of $10K each, so that is ROA of 10% for both. No difference there .  What happens if you paid in cash (for full ownership and equity) of house #1, but only put a 20% down payment on the 2nd house?  The ROA is the same, but you get more leverage on house #2, and your ROE jumps to 50%.

Consultantsmind Leverage

Leverage can be dangerous. This is obvious, but you cannot just keep chasing ROE returns by borrowing more and more.  Eventually the interest payments will be too high, the risk will be too great, or frankly, the banks will stop lending you money. It’s the same over-leverage story that gets repeated every financial crisis in the United States (1930s, 1980s, 2007), when investors borrow too much and cannot pay back their loans.

What is a good ROE?  Although averages do not mean anything, some guys at NYU Stern did some analysis of average ROE by industry here and it looks like this.  The average for all industries came out at roughly 15%.  It varied considerably by industry, with soft drinks at 27% and airlines at 2%.  Big difference.

Final thoughts: 

  • Use ROE to analyze and compare companies within the same industry
  • Look for the REASONS why the ROE is different from competitors (profitability, or asset efficiency, or leverage).  What is driving the ROE?
  • Look for any accounting tricks which boost ROE in the short-term
  • Be wary of companies with 2x ROE of competitors; they may be over-leveraged
  • ROE may be misleading for service companies; remember, they don’t have a lot of “assets”, so their ROA will seem unusually high, and the ROE even higher
  • ROE is used in other more nuanced financial calculations including weighted cost of capital (the opportunity cost of capital), called the WACC

Related posts:

Consultants (should be) serious proof-readers

“You have a typo on the 1st page”.  This was the low-light of my Friday.  A partner was reviewing a proposal we had already printed out for the (Mike – thanks for catching that typo – love it) client.  One typo was a missing helping verb “be” and the other typo was a verb in the wrong tense.  It was a bad verb day.  Some might find this a trivial matter, but this is sloppy and poor quality.

The proposal was good. My buddy and I spent 2 late nights on the proposal.  A lot of things I liked about the document:

  • It had a distinct point of view, differentiated; it stood for something
  • Strong narrative; telling the story of how we would help them
  • Sharp visuals with clear examples of the work we do
  • The pricing was reasonable, a good value; hell, I would have paid for it

It was proof-read (kind of). The tragedy of course was that I had the file proof-read by two people . . .two people, and both typos were not caught.  Why didn’t they catch it? Seriously?  Perhaps I could have been more prescriptive, perhaps I was too casual.  It is my fault (take more blame, give away more credit is how managers need to operate).

Small (even superficial) things matter.  Clients pay consultants to give them advice, dig through ugly data, clear through the politics, and do great work.  They don’t want to see the ugly reality that we are pretty human, full of flaws, and sometimes slackers.

What is good proofreading?  This takes many different levels, ranging from the strategic to the tactical, depending largely on how much time there is to the due date.  If you have 15 minutes to proof read, you will only be looking for the most obvious errors. If you have 2 hours, and the author has 3 days to improve it for another round of proof-reading, then you can look at some of the more structural and strategic issues too.

Each of these “levels” of proof-reading should ideally be done separately. . . so that you read once for strategic / narrative / structural feedback.  Then you read for tactical / grammar / typo / usage.  Try to proof 2-3 times, before you send back to the author.

Strategic / Structural:

  • Narrative: Section headers (e.g., Introduction, Approach, Timeline) in a logical order, clearly describing the content.  Anything missing?
  • Thesis-statement: Each paragraph has a point
  • Style:  Good writing is direct.  Take out superfluous, flowery, or deliberately vague consulting-y language.  For a list of cheesy consulting words look here.

Tactical / Superficial:

  • Spelling: Spellcheck only catches obvious things.  It does not catch “auto-corrected” phrases, proper nouns, and abbreviations
  • Grammar: This is the stuff we miss late at night when writing late at night (its/it’s) (they’re/their/there) (compliment/complement); list of common mistakes here 
  • Parallel Structure: When you make bullet-ed lists, make sure they all start the same way (if verbs, then use verbs), (if nouns, use nouns)

Visual:

  • Graphs / Graphics:  Visuals should be clean, clear, and relevant. I am a hater (strong word I know) of clip art / photos / filler graphics.
  • Formatting: Everything should be consistent. Use the same font, font size on each section.  Use the same bullets and alignment.  Add page numbers.  Be mindful of page breaks, and print settings (the worst is excel not formatted for printing)

Consultantsmind Proofreading

Lesson Learned: 

  • Need to be more specific to proof readers. . .(hey, could you check for #1 flow  #2 typos, syntax, usage, and language?)
  • Need to do the final proof read myself. . . reading it out-loud
  • Need to start earlier, give myself more time to work on it (not under pressure)
  • Need to find better proof-readers

Will let you all know if we win the proposal.  If we win – it was not because of the 2 typos.  If we lose – it was not because of the 2 typos.  Let’s get real.

Related posts

Working at the Hotel

It’s 1am and I am working on a proposal due this Friday.  It has to go through multiple reviews, so I would be wise to get it 80% finished tonight.  Oy Vey.

Walking around the hotel – to wake myself up – this is what I see.   Hope you enjoy this visual diary of my Tuesday night on the road.

Consultantsmind - Hotel Lobby

Consultantsmind - Lobby 2Consultantsmind - Lobby 4 Consultantsmind - Lobby 3Consultantsmind - Lobby

Good night everyone.  Do great work this week.  Work like you care.

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CIA hires McKinsey; $10M for a reorganization project

If there is any question that management consultants are hired to do difficult projects, look at this – McKinsey & Company will help the CIA reorganize and restructure here.

Consultantsmind CIA logo

Apparently, the plan is for the CIA to go from a functional structure (with separate analysis vs. espionage units), to one that is more integrated by regional focus or topic. This is big talk for the CIA which has worked with the existing structure for decades.

“The overhaul is designed to foster deeper collaboration and an intensified focus on a range of security issues and threats, replacing long-standing divisions.”

“CIA veterans and experts described the restructuring as among the most ambitious since the agency was founded in 1947.”

Apparently, this was based off of the internal best practice of the CIA’s Counterterrorism Center (CTC) which gained influence and power after the September 11 attacks here. While this will be more of a matrix structure, it will also decentralize and accelerate some of the decision making.

Would you like this job?  Are you good enough to tell 21,000 spymasters how to do their work, and how they should be organized?  This is tough stuff, backed up by years of experience, a problem-solving framework, and a healthy dose of confidence.

Bring in the consultants.  As one client told me recently, “You cannot be a prophet in your home town, you have to hire outside experts”.  Even the most savvy client, needs some help from consultants.

“It’s probably a good thing to bring in outside perspective at a time when you’re doing something this challenging,” said a former senior U.S. intelligence official.

What will they recommend?  Take a look at McKinsey’s website and case studies; you will see some of the activities and likely recommendations here:

  • Assess the strengths and weaknesses of the current organization and design
  • Highlight areas where the organization presents challenges, which might lie in its structure, linkages, or culture
  • Define criteria to guide the design process
  • Design tests help clients make choices on critical questions
  • Focus management attention on the strategic priorities and critical operations
  • Focus head office operations on value
  • Make sure all units have clear performance measures
  • Enable enterprise-wide collaboration
  • Remove complexity that creates unnecessary cost and organizational friction

While these activities might seem like a common sense approach to organizational issues, it is something the CIA is willing to pay McKinsey & Company $10M to fix.

See this larger McKinsey & Company compendium on organizational structures, designs and operating models.  From 2012, 82 pages, and 8.1Mb for download here.

The next time your client thinks they have it all figured out. . . remember that even the proud CIA knows how to reach out for consulting help when they need it.

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Consulting hack: Investor relations presentations

Candy Crush. So last night, my wife and I were playing Candy Crush on 3 different devices.  Yes, it is a big part of our recreation life.  Sad and funny.  So which wretched company created this time-sucking game?

King Entertainment is publicly traded under the ticker symbol of KING (nice).  Looking at their investor relations presentations here, you get a good summary.  As with any IR website, remember this is what they tell their bosses – Wall Street analysts.

Consultantsmind King - Logo

Monster revenues.  These guys make a crazy amount of money.  In Q1, $604MM with a 44% EBIDTA margin.  With that run rate, they will make 2.4 billion in revenues with $1 billion in profits.  What?  Where does that money come from?

Consultantsmind King Entertainment

364 million monthly unique users (MUU).  So that means globally, they have a population the size of the USA playing some form of game monthly.  Amazing.

Where does the money come from?  Clearly not all of those people pay money.  The majority do not.  It’s a freemium model where they give the base game out for free, and those interested can buy more cheats, hacks, and power moves.  Looks like about 8.5 million people pay to play, and that amount has been increasing to where it is now. .  at $23.64 a month.  8.5 million people paying an average of $283 annually.  Yikes.

Consultantsmind King - Average monthly bookings

Yeah, but isn’t it a 1 hit wonder?  If I were an investor, this would be my first question.  Remember how Zynga was Farmville crazy, and then people tired of it. . . sending the stock crashing?  Looks like KING is aware of that and addressing it head on.  In the most recent quarter, 62% of their revenues were not Candy Crush.

Consultantsmind King - Non Candy Crush

Paying dividends.  Unlike most young, fast-growth, tech companies, KING is paying out dividends to their shareholders like a stodgy utility.  I guess they see their growth somewhat limited and would rather give money back to shareholders and buy back stock.  Interesting because that is some financial savvy, and self-awareness in a tech start-up that I would imagine is rare and probably wise. More cynically, it is a good way for people with shares (founders, angels, and venture capitalists) to get their money out without noticeably “selling” their own shares.

Consultantsmind King - Dividends

Stock has not been great.  Looking at the stock trend it has been going side-ways or down since the beginning.  Nothing inspiring for a long-term investor here.  Probably better to just stick with the game.  Even $23 a month for the hardcore user is cheaper than losing money in the stock.  Sugar Crush.

Consultantsmind King - Stock trend

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Accounting is not perfect; the good, the bad, and the ugly

Financial accounting is the language of business – no question. It’s how investors, managers, creditors, suppliers, and regulators keep track of the “score”. Without it, even the most basic questions like “how much profit did you make” would require hours of meetings, persuasion and probably significant disagreement. It would be like talking to someone without using verbs. It would work – eventually – but painfully.

You have to know the basics.  Consultants without a strong understanding of the the vocabulary, frameworks and principles, are certain to embarrass themselves in front of the client. If you don’t immediately know what A = L + E stands for in accounting, then you need to do some remedial studying.  As an exercise, read the Economist Business section, and stop whenever you don’t understand something related to a financial statement and look it up.

It seems perfect, but it’s not.  On the surface, accounting seems like a monolith of precision, rules, and conservatism; something hallowed, balanced and almost scientific. After all, the financial statements tick-tie with each other, articulating perfectly. Financial statements are permanent and accessible – all online, ready for reading.  The GAAP and IFRS guidelines tell what we can, cannot do.  Don’t want to go to jail.

This makes accounting seem more precise and immutable than it is.  Savvy consultants need to know that financial statements are the basics, but far from the whole story. Here are several reasons financial account is imperfect. For the CPAs, feel free to “pile on”.

The Good (the quirky way accounting works)

1. Accrual accounting.  Cash accounting is very brutish – it counts how much cash you spent or have at the end of the quarter and it ends there.  Simple, but misleading.

In contrast, accrual accounting attempts to fix this by dividing up the revenue or expense and matching it to the right time period.  The easiest example is the depreciation on equipment.  If you run a printing shop and pay $700K for a piece of machinery, your accountant will stop you from writing that up as a one-time expense. No, no, no.  Since the equipment will likely be used for 7 years (as an example), you can only deduct 1/7th of the value (-$100K) per year as an expense.  Better, not perfect.

There are a dozen types of accrual accounts which essentially fall into these pre-paid and accrued expenses and income. You can see this type of splitting, pulling-in, pushing-out of expenses throughout the balance sheet.  For example, Joe charges his airline tickets (accounts payable) on his corporate American Express (accured income) today for a flight next month and gets 3,000 mileage points (accured expenses).

2. Historical costs – Accounting by its nature is going to be conservative, so it forces companies to value things at their acquisition cost.  This will understate assets that have appreciated (like a corporate headquarter building in Manhattan that was purchased 30 years ago), or overstate assets that have lost value (e.g., was MySpace really worth $580MM when Rupert Murdoch bought it?).  This is why some investors are lobbying McDonalds to spin off the real estate of their locations into a REIT to unleash the historical cost value trapped in the shares here.

ConsultantsMind Accounting is not perfect

The Bad (oddities and things to be aware of)

3.    One-time events – As with any analysis, you want to look at things when it is in “steady-state”; to see the trend, extrapolate a forecast, or guesstimate the future, you want to look at a base case.  Clearly, making assumptions on spikes and blips in profitability would be stupid. As such, keep an eye out for large non-reoccurring expenses or gains – anything that does not occur during the ordinary course of business. A few examples, Yahoo records a huge bump in earnings because of a $9 billion windfall from the IPO of Alibaba.  That is not normal.  Look at the graph below, the orange bar goes from: low, low, low, low, CRAZY high. Not normal.Consultantsmind Yahoo Alibaba

4. Management Discussion and Analysis (MD&A).   This is where the management brings up all the most salient points (revenues, costs, financing, competition etc).  Of the hundreds of pages of a 10K, these are the 10 pages you always read.  Inside these narrative pages, you can often find lots of hidden details which the company needs to disclose (changes in depreciation schedule, changes in accounting treatment etc) which they don’t really want to brag about.  All those tidbits can add up to a dramatically different look at the financials.

The Ugly (tips, tricks, secrets)

The public markets are ruthlessly competitive and analysts are continually peer-pressuring companies to beat increasing expectations.  Executives work collectively to meet their quarterly numbers, sometimes through overly aggressive interpretation of the financial accounting rules.  (Ominous music starts playing in background).  Some of the ways that that companies and managers bend accounting rules in their short-term favor, which are (more or less) legal might include:

  • Loose revenue recognition (sales that are not exactly finished)
  • Inadequate accrual for expenses (no saving enough to pay for the expense)
  • “Cookie jar” reserves: company accrues extra expenses when times are good (putting a cookie in the jar for a rainy day), so that when earnings are down, they can reduce their reserves (take a cookie out)
  • “Big bath” one time charges.  Companies are fairly notorious for dumping all their losses and questionable accounting practices into 1 big non-recurring loss.  It’s like they take out ALL of their garbage at one time.  Analysts are trained to overlook these 1 time events, and this can hide structural problems elsewhere.
  • “Stuffing the channel” Companies sometimes push extra product to their distributors (stuffing product in the sales channel) so it inflates sales short-term. The SEC has litigated several companies for doing this. Al Dunlop from SunBeam was one of the most famous offenders here.

The list of accounting “improprieties” can go on and on, but you get the idea. Companies steal revenue from future periods, or create “cookie jars” of savings to use at a different time, all in the effort of smoothing out earnings. Financial accounting is a series of rules, and any good mobster will tell you, “rules were meant to be broken.”

As a consultant, be aware of the good, bad, and the ugly.  We don’t break rules, we don’t help clients break rules.  That said, we need to know how to.

Related posts:

Corporate marriage counseling

Organizations have trouble talking to themselves.  Ask any consultant and she will tell you that a good portion of her job is helping one part of their client organization talk to the other part.  Odd, I know.  For those not working with Fortune 500-size companies, you may assume that big companies communicate effectively.  Many times they don’t.

Business is increasingly complex and fast. Thomas Friedman made this abundantly clear in his 2005 masterpiece The World Is Flat; market forces and the digitization of information makes it a free-for-all of global, competitive. . . complexity.  Any $10+ billion company has business units, regions, functions which all fight for the attention of their customers and internal sponsors.  Each sub-optimizes their own little piece of the pie. Everyone is doing their one small thing very well, which leads to the sum total of chaos.

Intra-company confusion.  It is a surprisingly common for one part of the company to be unaware or completely misinformed on the activities of the other part.  The right hand does not know what the left hand is doing.  There are many potential reasons:

  • Different data sets; lack of system integration of data
  • Excessively changing leadership and directions
  • Excessive layers of management creating lots of “mailmen” of information
  • Lack of a trusting culture; over-reliance on reports, documentation, and approvals
  • Large number of acquisitions with limited post-merger integration
  • Recruiting of leadership from outside the company and competition

Corporate marriage counseling.  I joked with a consulting friend the other day that 1/5 of what we do is marriage counseling.  Now I wonder if I under-estimated that.. . . 1/3?

We call these activities different things, but at the root. . . it is focused on using data, and collaboration tools to provide structured thinking, and clear communication.  Yes, it takes skill, nuance, and verve, but it is also a form of corporate marriage counseling:

  • Surfacing internal best practices from different divisions
  • Driving alignment on shared goals, outcomes, and expectations
  • Getting cross-functional stakeholder buy-in
  • Analyzing the value chain and synchronizing complementary processes
  • Standardizing roles and responsibilities for job leveling
  • Running post-merger integration across businesses
  • Conducting strategic planning processes
  • Developing governance and operating models
  • Casting vision and mission statements
  • Cascading performance metrics and creating dashboards

You get the idea.  I could go on for another 4-5 pages, but all these activities have 1 thing in common – it involves bringing different parts of the business together and getting some agreement.  Getting the two spouses to talk.  Fred and Ethel.

Consultantsmind Corporate Marriage Counseling

I am not a licensed marriage counselor, but. . .  here are 12 things I have found useful in bringing different groups of clients together:

  • Get the client talking and working through their own issues
  • Listen first and understand; people assume consultants don’t listen well
  • Be authentic; find a way for clients to relate to you personally
  • Aim for your client’s success and tell them explicitly
  • Document what you heard, structure the thinking, get feedback
  • Pre-sell your thinking ahead-of-time, and separately with people
  • Assume the best; have positive intent.  Consultants create change
  • Find win-win for the clients; and ruthlessly promote them
  • Don’t fall into the trap of talking bad about the “other team”.  Stupid.
  • Don’t call pointless meetings.  Do the work, use deliverables to drive agreement.
  • Use the power of awkward; use logic to make it obvious what the right thing is
  • Call in the big guns; sparingly use your executive sponsor to reinforce behaviors
  • Bring people back to the main vision, mission, purpose; root them in the WHY

What other tools, methods, principles, tips, and chicanery do you use to get clients to better communicate with each other?   What works?

Do you agree with my analogy of corporate marriage counseling?

Related Posts:

 

7 Key Questions: Who, What, Why, When, Where, How, How Much?

This is a post I made 2 years ago, the most popular post by far.

Who, What, Why, When, Where?  These are five questions kids learn in grade school or when first learning a language.  It covers the basics and helps you understand the situation and context.  My high school friends can attest to my poor memory, but even I can remember these basic words in french: Qui, Quoi, Quand, Où, Pourquoi.

These 5 questions are fairly famous and an often-quoted way to think through problems.  They have been repeated by Cicero, Thomas Acquinas, and Rudyard Kipling.  Journalists are trained to answer those 5 questions whenever they write an article or press release.  These can also be useful for consultants, with two small additions.

How and How Much?  For any consultant, eager to see her recommendations implemented, a lot of thought needs to be given to how it will be implemented and how much it might cost.  For all the snark-y comments about strategy consultants giving high-minded solutions that are condemned to be “shelfware”, there is a hint of truth that many good ideas die on the hill of implementation and cost.

What kind of problem is it?   There is a good chance that the client’s problem falls into one of these buckets.  If it is a strategy project, likely it is a WHAT question.  Conversely, if it is a operations-related project, it is really looking at HOW to implement a good idea efficiently. Most seasoned consultants have been on projects that touch these areas.

Questions and Topics

Answer the right question.  It is easy to fall into the trap of addressing the wrong issue.  All too often clients hire consultants to solve problem X, only to find out that the problem is actually with Y.   On a more personal note, I had dinner with a good friend last night and he adroitly pointed out that I was too focused on answering the HOW (on a big decision in my life), instead of taking a step back and answering the WHY and the WHAT.  Sanity check.

“Management is doing things right; leadership is doing the right things.” – Peter Drucker

Think broadly about the problem. Once you have targeted the right question, think a bit more laterally and see which of the other questions should be answered too.  The level of detail will vary, but you want to be as comprehensive as the time and budget allows.  In this example below, this hypothetical project actually covers a lot of ground.

Who What Why When Example

Look for the add-on work.  Chances are very good that during the course of solving one problem, you unearth other issues.  It is all too common for a $50,000 (loss-leader) diagnostic project to lead to a  $750,000 (profitable) project with multiple work streams and consultant teams.  Clients see that you do good work, and want more help.  It is natural and good thing for the client and the consultant.  Look for those opportunities.

“My greatest strength as a consultant is to be ignorant and ask a few questions.”  – Peter Drucker

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