Cheaper Advice

Structuring a consulting project into phases is the approach CFO Karen Cambray is taking at Zeemote, a small private company that manufactures and distributes gaming controllers for cell phones. Zeemote was in the process of readying products for sale in Europe when Cambray joined in September 2008, and she wanted to make sure the legal aspects were addressed properly. While she "could have spent a lot of time researching and networking" to get the answers, she decided she was safer using outside help and hired High Street Partners. While there was not, in fact, much wiggle room on the rate, Cambray kept a lid on costs by initially hiring the consultancy only to write a white paper on the pros and cons of setting up an office in various countries. Then, satisfied with that, she hired High Street to help with the administrative work of registering in the United Kingdom, the country she chose.

Cambray is now considering using the firm's outsourcing capacity for administrative tasks like processing European payrolls. Throughout the process, she says she and her controller look at monthly consulting charges and compare them with their estimate of the time it would take to do something internally, "and we reassess with every new project we add."

Consulting firms say this type of thinking is now par for the course. "Less today is better than more tomorrow; clients are aiming to do smaller projects rather than big bang," says David Michelson, head of Tata's business-process and change-management consulting practice in North America. Projects involving outsourcing (and often a new source of cash) are illustrative, with the time-consuming strategy piece getting short shrift.

"A year and a half ago, clients would have had big internal debates about whether to do an internal captive or go offshore, or to just improve existing processes," says Bob Cecil, global executive director for Equaterra's business and financial processes group. "Now executives aren't tolerating a lot of back-and-forth to get everyone on board; they want to move faster to a solution."

Staff Time Counts
Finally, a key ingredient of a successful consulting engagement is taking a realistic view of how much staff time it will take to manage the consultants. Compellent's Judd just hired Grant Thornton to do a "382 study" (as in Section 382 of the Internal Revenue Code) to maximize net operating loss carryovers, an R&D tax credit study, and some sales tax work. "Just on the R&D piece, the credit from the federal government could be 10 to 20 times what we'll pay the consultant, so it's a real no-brainer to do it," he says. But with the work slated to span six to nine months, Judd is keeping an eagle eye on how many hours he's being billed for. Without formal milestones in the contract, "the number-one thing" is to dedicate a staff person to make sure consultants "aren't wasting time when they're on site," says Judd. To that end, he waited until year-end reporting was over so that one of his directors of finance who "is not a tax expert but knows everything Grant Thornton needs to provide" could take on the job of monitoring the consultants.

The cost of staff time is important to bear in mind even when the consulting work is done on a contingency basis, or ostensibly for free. Crane of ModusLink Global Solutions is currently interviewing various firms to comb his accounts-payable records for errors and assess his real-estate portfolio for additional savings. With data housed all around the world, though, the company will incur the upfront cost of having a staff person assemble the necessary information, with the risk that no savings emerge. Not to mention that the work is "quite boring — there's no way around it," adds Crane.

But the result of a consulting engagement ought to be exciting, in terms of better growth, profitability, or efficiency. Make sure that the consultant takes your company where you want it to go — and that when it gets there, you aren't shocked by the size of the fare.

Alix Stuart is a senior writer at CFO.

The Big and Small of It

When Compellent CFO Jack Judd was looking for tax help for his small, publicly traded technology company last spring, he auditioned several accounting firms, including one of the Big Four, but ultimately chose a (relatively) smaller firm. "The Big Four are easy choices when you need lots of infrastructure and someone to come in quickly," he says, but since they were the most expensive and the project wasn't particularly time-sensitive, Judd went with the smaller firm. It wasn't just cost that drove his decision; the fact that the people who met him from that smaller firm were also the ones who would actually do the work mattered as well. "An awful lot of my choice was about who I trusted [the most]," says Judd.

Indeed, many CFOs at small firms worry that they will get lost in the shuffle if they go with a big brand name for consulting services. That hasn't stopped Sentinel Group CFO Ryan Ziemann from hiring global information-technology vendors to help his 30-person health-care-fraud-prevention firm, though. To help ensure good service, he says that he avoids upfront and flat fees and pushes for full contingency pricing whenever possible, so vendors are "strongly incented to perform well."

So far, it has worked out well, says Ziemann. Not only has one vendor's software tool helped identify more than $50 million worth of health-care fraud in the past five years, but the vendor's support team is always available by phone to Ziemann's staff, and recently helped them develop a special report based on the software's capabilities at no additional cost.

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LinkedIn Company Connections:

• IBM |
• Tata Consultancy Services |
• ModusLink Global Solutions |
• KPMG |
• American Electric Power |
• Compellant |
• Sentinal Group |
• Zeemote |
• High Street Partners |
• Equaterra |
• Grant Thornton |