How To Hire A Consultant - 7 Things You Should Know

You have done your homework.  You have checked industry references, past client successes, even past client failures.  You have visited their offices, they have visited your plant.  Your team is excited, their team is excited.  But then comes the engagement letter and it doesn’t cover what you have discussed.  This is the time to nail down the business relationship with your consultant and make sure the engagement goes as smoothly as it can.

Scope of the Engagement

The first item you need to address with your consultant is the scope of the engagement.  Simply, the scope of an engagement is an outline of what services the consultant is going to provide.  The services should be simply stated as action items and steps leading to a specific goal.  “We are going to do steps (a), (b) and (c) in order to accomplish goal (d).”  Avoid vague, open-ended language full of industry jargon.

Work Product

This is the physical output of the consulting engagement.  It will include document packages, creative items, business plans, financial projections, software programs, web sites – whatever you have contracted for.  Again, the language should describe identifiable products with as much detail as you like.  Consider inserting an Appendix into the engagement letter to outline substantial detail. 

The Term

The term is the anticipated length of the engagement period.  Agree on how long you expect the consulting work to take.  To allow for the possibility of longer time frames, add renewal periods at the mutual consent of the parties.  If all goes well, you may decide to renew.  If not, then you will be able to terminate the consulting engagement without a fuss.

The Team

The heart of any consulting engagement is the individual(s) who will be servicing your account.  It will not matter to you that the firm has some of the most high-powered talent in the industry – if they don’t do any work for your company!  You will want to see a detailed schedule of each person who will work on your company’s business and the number of anticipated hours for that consultant and their billable rate.  Make sure that you have met all the team members prior to the engagement.

Compensation

The above schedule will provide you with ample information on how the consultant plans to service your account.  It will also lay out the foundation for the compensation the firm expects to receive and how they intend to earn it.  Read this part carefully and make sure that your company’s best interests are served.  Make sure any overage is addressed and that periodic progress (and billing) reporting is addressed.

Avoid “Blended Rates”

Be very careful of any consulting engagement letter which provides only "blended rates" for the group of people who will work on your business.  This quotation will provide a range or an average of the rates to be charged.  You will want to see each consultant by name, by price and the estimated number of hours they will work.  After all, that is how the consultant runs its business and how it schedules its personnel – and how you will be charged!

Appoint An "In-Charge"

Consider appointing one of your managers to manage the consulting process for your company.  The key aspects of this role are to ensure the smooth flow of information back and forth and to streamline the progress reporting. 

One last point:  make sure that you have provided the consultants with all the upfront information they request, plus any additional information that will tell your company’s story.  The more they know about your company and its business plans, the better able they will be to come up with a successful plan.

Take care when negotiating the consulting engagement letter.  At its best, it will help frame your expectations and pave the way for a successful collaboration.  At its worst, it does not define the project and opens the door to a serious resource drain.