May 17th 2007

Why companies hire outside experts (part 3 of 3)

What to look for when hiring an outside consultant.

Domain Knowledge. Experts have some domain knowledge but not too much.

  • Having too much can often lead to the consultant maybe believing they know what you are all about before ever talking to you, a major anchoring bias.
  • Second, they may lose objectivity by selling exactly the same solution their last client bought, an extreme anchoring bias.
  • Third, their expertise may be so tightly limited to a single industry that there is no opportunity for you to receive the benefit of parallels in other industries and well-managed firms with innovative channels of distribution.
  • Fourth if they do derive a unique, new solution for you, rest assured they will let the industry know the key to your program.

Structure. What is needed to make major business decisions is structure. A structured and efficient approach to a problem attends to the important specifics of a particular business or market and leads to a solution.

  • The structure the consultant uses is most often revealed through his or her questions.
  • The second task of the questioning process is to determine the range of existing frames for the problem within the organization.
  • The third task is to find what the organization knows about the problem. Even more importantly, there is a need to find out what the organization doesn’t know about the problem.
  • Finally, the objective in questioning is to break the problem down. This is called the “decomposition principal”. Reasonable and workable estimates of difficult, unknowns can be obtained if the problem can be broken apart with knowledge of the structure of the metrics of interest. Experts accomplish the effect of decomposition by constructing process models, on the spot, to drive home the structure of the questions.

With thanks to Harold Gutovich for sharing the core of this material for us.

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