Scott Silva got a job steering concrete-laden wheelbarrows at age 16 and started a local ready-mix company as a young man. He knew the concrete contracting business from the ground up.
But when he wanted to expand into the construction materials supply business in 1999, Silva needed help.
“During that transition, my firm was going from a small contracting business to $20 (million) to $40 million in gross sales, and I realized I was in way over my head,” says Silva, owner of Folsom Ready Mix Inc. “I’m not a college graduate, and I never went to business classes.”
Despite friends and family telling him it was a waste of money, Silva hired a management consultant in 2000.
“I was appreciative that I spent that money up front,” he says. “It was a lot of money at the time, but as time went on and the company became successful, I feel that if I hadn’t had that consultant’s help in the beginning, I don’t think I would have been where I am today.”
Management consultants might seem a luxury while consumers and businesses are tightening belts. But Silva and many other companies are investing in consultants to improve organization, find cost-saving shortcuts, shift personnel and manage clients and employees so that when the economy improves, they’ll be poised to pounce on new opportunities.
“It’s a perfect time to hire consultants and have a second or third party look at your business,” Silva says. “We all know we’re bumping along the bottom, and it’s just a matter of time before we get some real indicators that we’re pulling out of the recession. We want to be prepared for that.”
Consultants can offer a range of services, from supplying contract CFOs to formulating crisis communication plans, planning for succession and preparing for public stock offerings.
Sherri Petro, president of VPI Strategies, says a consultant should be called in only when a situation can’t be better handled by existing employees. VPI Strategies is marketed as a service to help companies create positive working environments through leadership, strategy, coaching and training.
“It’s a delicate balance, figuring out if you have the skill set to solve a problem or if one of the employees has expressed an interest in a certain area,” Petro says. “I’m a big believer in employee growth.”
Consultants, however, can play a vital role in researching, developing strategies and training employees and executives.
“If you look in-house and realize the stretch for an employee may be too much, or they don’t have an interest, it may be time to bring in a consultant,” she says. “Or if you need outside perspective; sometimes, business people can’t see the forest for the trees.”
Jeanne Reaves knows the value of a management consultant from the inside out. Former president and CEO of River City Bank in Sacramento, she now runs Jeanne Reaves Consulting. She was recently hired by Silva to develop innovative solutions to inflate flat profit margins.
“A consultant can provide direction and guidance and identify business solutions,” Reaves says. “I felt this way when I was hiring them. When I was a CEO, I would look at our organization and realize you can get caught up in the direction you’re going without seeing outside opportunities.”
Many executives and companies get entwined in day-to-day operations and don’t envision an overall strategy for the organization.
“A consultant can come in with strategies,” Reaves says. “They ask questions like, ‘Do we grow organically or purchase companies? What’s best for the bottom line and the culture of the organization?’”
“It’s just a matter of time before we get some real indicators that we’re pulling out of the recession. We want to be prepared for that.”
Scott Silva, owner, Folsom Ready Mix Inc
Reaves tries to help management define goals and develop action plans and solutions, then she puts them in a matrix for implementation. All of it should translate to bottom-line results, she says. She particularly likes working with businesses’ boards of directors.
“I believe a corporation can’t be all management; there’s also a board of directors,” Reaves says. “They need to be in place and strong. I can help transition from a family board of directors to outside directors. I’m also a huge proponent of succession planning, making sure people within an organization have the skill set to take over leadership.”
Many times, employees know how best to improve an organization, Petro says. She holds group meetings and interviews employees, often a good way to uncover ideas and to pull staff into the loop, announce trends and gain support for any prospective changes.
“Someone inside an organization can understand the flow of a process and has the subject matter expertise,” Petro says. “I can’t tell you how many times this happens, that I’m called in and I’m basically an amplifier for people who already know what needs to be done. I’m a communication vehicle. Executives will ask me, ‘How did you think of that?’ And I tell them, ‘I got that from Ron in accounting.’”
If you’re thinking about assigning a task to a staffer or hiring a new employee to tackle a project or system, Petro advises weighing the costs involved with training a worker against the cost of a consultant.
“It’s a matter of economics,” she says. “How long will it take a person to get up to speed and develop expertise? Sometimes it can be better to hire from the outside.”
Larry Bienati likes to work with businesses during their evolution from inception to public sale. He is the owner of a consulting practice based in Benicia and Homewood, a vice president for organization development at The Cooper Cos. Inc. in Pleasanton, and an adjunct business professor at Sacramento State.
“I work with startup companies before they grow into the stage of an (initial public offering),” Bienati says. “These companies go through a cycle from the entrepreneurial stage, then reach a critical mass and then need to be a professionally run company.
“Many brilliant leaders are good at identifying a product that will sell but not always the best leaders to take their companies to the next level.”
He recommends companies hire a management consultant at least every three to five years to keep the organization’s vision “renewed.”
“They shouldn’t be complacent,” Bienati says. “A consultant should be brought in just to take the pulse of the administration and management team and use those data points to reframe the company’s missions, goals and strategies.”
Outsourcing can also save costs and prevent top-heaviness, Bienati said.
“Companies may have a chief financial officer, a controller and a human resources director,” he says. “Sometimes companies get too large and bureaucratic, then they have to get decentralized.”
He agrees a lack of communication in the workplace can be a huge barrier to success.
“Top management sometimes goes through the classic stages of denial,” Bienati says. “A consultant can see when information isn’t working its way from the bottom. I won’t say they’re clueless, but if there isn’t an open, honest conduit of communication, it can lead to organizational decline.”
Bienati’s services can range from a phone call or lunch meeting to a nine-month assessment of the organization. When that happens, Bienati figures he should produce at least 10 times the value of his cost for consulting.
“Say someone spends $10,000 on my services, I need to see anywhere from $100,000 to $1 million in decreased costs and increased profits,” he says.
Companies might particularly want to seek help in crafting a crisis management plan. Vintage Foster, a former journalist and president of AMF Media Group, based in San Ramon, says his company helps businesses frame their message and prepare for the worst in a world saturated with media.
“With the growth and shift in information being shared online, people need to be able to share their thoughts in a certain way and volume,” Foster says. “Lawyers and accountants often don’t have those strengths, to communicate their mission.”
His company has Capital Region clients, including Jamba Juice and Kaiser Permanente, and he helps them get out their “healthy lifestyle” philosophy.
His clients know Foster offers crisis management, but often he counsels them not to contract for those services.
“Crisis management is not cheap,” Foster says. “Many times, I can walk through a situation with a client: What would be the most unflattering way this could come out, and what would be the negative impact? Forty-five minutes into a call, we can determine if they have the resources on staff. If they have the capability to release and control their message, they don’t need a consultant.”
Still, companies should have some sort of crisis communications plan, particularly businesses offering any product that significantly affects the lives of consumers, Foster says.
“Even the best businesses will make a mistake at some point, and they need to gauge how that mistake will impact the ongoing brand.”
Having a mid-business crisis? Don’t panic. Steve Telliano, vice president of Edelman, helps businesses put together a plan for damage control and media relations when dealing with a calamity. Here’s a checklist of issues to consider when assessing a crisis and deciding whether to get professional help from a consultant:
Media interest. Will this be one story in one or two media outlets or an issue that will be covered by multiple outlets over multiple days?
Bandwidth. Is there someone within the organization who can devote time to manage this crisis without sacrificing the company’s ability to operate? Business can’t afford to come to a halt when a crisis happens.
Perfect storm. Is this crisis complicated by other problems happening at or near the same time? Is this a crisis that has the potential to be so damaging to an organization’s reputation that mishandling it is simply not an option?
Preparation. If you have taken the time to prepare for a crisis, you will definitely have an easier time managing one. If not, you may need help from a professional for situations wherein others may not. While not all crises can be envisioned, Telliano says an organization can take basic steps ahead of a crisis, when “time collapses … and hours become minutes.”
Internal culture. Does your company listen to its own employees, or will it take someone with an outside perspective to help bring the real-world point of view into the crisis management operation?
Competing interest. Is there someone who is going to fan the flames of your crisis? If so, you may need help preventing them from making your crisis worse or perceptibly worse than it is.
Feeling in the dark. There is usually no clear path forward. Leaders need to know and expect this. “You have to gather as much information as you can from a number of perspectives, make a quick decision and take action,” he says. While the future may seem murky, executives can’t get too bogged down in weighing all the options, as the crisis only worsens with each passing moment.
For more information on Kyle Monk:
Recommended For You
14 for ‘14
The essential business metrics you need to track in the new year
New Year’s is the quintessential time for small businesses to make (and keep) resolutions for growth. But achieving your company’s 2014 goals hinges on knowing some important numbers, and many businesses never go beyond their income to identify and track essential metrics. Here are the 14 most important performance measures to track this year.