Change management: Are consultants worth the money?

In a changing IT market, the ability to revamp company direction and strategy is a management essential. But with the economy...

In a changing IT market, the ability to revamp company direction and strategy is a management essential. But with the economy faltering, change brings risks as well as potential reward, so where can smaller businesses turn for help?

The stampede by IT resellers to build up more services business is causing more than a little upheaval in the channel at the moment, with a multitude of organisations suddenly embarking on quite drastic changes to their business.

When large national or international organisations initiate changes to their business operations, they can draw on the services of professional change management or business re-engineering consultants, who help apply structure to the transition process.

However, such consultants are not geared towards dealing with smaller enterprises, and their fees can be prohibitive. The average IT reseller is unlikely to be happy to pay £3,000 a day for what can be very general advice.

Telecoms reseller Alternative Networks (ANL) prefers to call on its non-executive directors, who monitor the company over a long period and can give personalised advice. It pays between £12,000 and £20,000 a year to retain these services. According to co-founder and marketing director Chris Wilson, this equates to about £1,000 a day plus expenses for that person's input into board meetings, plus advice by telephone. "They're a good discipline," he says.

ANL is now turns over £18m and is currently making the transition into the data market, with the aim of becoming a true dual-skill voice and data integrator. Having a non-executive adviser to hold the company's hand as it makes this leap is an essential rather than a luxury, according to Wilson. He and his co-founder were just 24 and 27 when they started the business and so have long sought the input of more experienced business managers to keep them on the right path.

Non-executive guidance
The company has employed three non-executive advisers since it started up seven years ago and Wilson says it's healthy to rotate these on a regular basis. "We took on our first adviser when the company was young and we needed some experience. He gave us monthly goals and plans," says Wilson. "But eventually we outgrew him, and we got to the point where he was patting us on the back at meetings rather than asking hard questions."

They then parted company with adviser number one and took on someone with a City/corporate finance background who could take the business through the next stage of development.

More recently, as ANL has started to expand into the data market, it has sought business expertise over City nous, and now retains the services of a former chief executive of a large global company who has a wealth of experience of managing change, is used to dealing with mergers and acquisitions and has international skills.

ANL has first-hand experience of the dangers of making rash decisions. When the company first started to broaden from voice product reselling into higher-end telecoms systems integration a few years ago, it took on two product lines, Avaya and Alcatel, in the interests of giving customers choice, but found it had overstretched itself.

Wilson reckons the experience set ANL back a year in sales terms. In the end it had to drop the Alcatel product line. The company is now expanding into IP telephony, but is adamant it will only take on one platform, probably Cisco's Avvid. "We don't want to make the same mistake," says Wilson.

Calling in the consultants
Before it commits to the Cisco product, ANL wants to make sure it has assessed the market correctly. In addition to the services of its current non-executive director, the company has retained two consultants to help it size the market opportunity. One is an MBA, the other a financial consultant.

For £1,000 a day, the pair will provide a full market analysis and assess new opportunities for the company in both the data and mobile communications markets.

So that ANL retains control, it insists on a project fee rather an open-ended day rate. "We start out with a clear idea of what we want from the consultants and give them fixed goals," says Wilson. "You have to 'run' consultants much like lawyers and accountants and keep a close tab on them."

To make sure they're working with the best possible information, ANL has invested heavily in a series of management reporting tools, which it uses to analyse its existing business activities and use of resources. It then feeds this information to the consultants.

Yet consultants and non-executive directors can only do so much. One danger companies face when drawing on external help is an over-reliance on their expertise, according to independent change management consultant Tirdad Sorooshian.

"Don't bring in a change manager to manage change," he warns. "This means the company's management has abdicated its main responsibility." All a consultant can really offer is an unbiased perspective, he adds.

At the core of successful change management is people, according to Sorooshian, who charges from £1,250 to £2,000 a day to advise companies on their change process. If the new vision is not communicated well to the right people - both within the company and also its customers and suppliers - the whole process could fail. If staff at any level feel excluded or threatened, they might leave.

Too much information
Compelsolve discovered the importance of managing staff communications when it embarked on its transition from mid-range systems reseller to full solutions provider in February 1999, a process that has taken two-and-a-half-years and is still ongoing. The company couldn't afford the luxury of external help because margins at that time were far from healthy - hence the decision to move up the IT value chain.

Managing director Paul Berry had to fall back on his own resources to manage the process. While he recognised the importance of communicating well with his staff, he was too candid too early, which jeopardised business continuity.

Berry was lucky with most stages of the change process, starting with a clear vision and boosting progression towards this with the successful acquisition of Oracle integrator Midas. Yet when Berry began telling the staff about his plans, just five months into the project, he created a climate of uncertainty that took six months to stabilise.

"I was too bullish," he recalls. "It's dangerous to tell your sales force that you're changing. You need to keep them focused on selling the products you have today, but even the best sales person will find excuses not to sell if you give them half a chance. Mine all became business development managers overnight, which we had to put a stop to."

Although Compelsolve has now come a long way in its transition, with up to 20% of its revenues now generated from pure consultancy and overall margins averaging 17% to 19% and climbing, Berry notes that the new business model may only have another 15 months' usefulness in it before additional changes may be required.

"It's true what they say," he points out, "the only constant is change."

Time to make the change: where to go for advice
GOSPA Planning
offers a "self-help" tool, which helps companies such as smaller resellers manage change themselves in a structured way. In its simplest form, this process can involve just half a day's training, and a day's review. One value-added IT consultancy realigned its business into three divisions at a cost of under £5,000 using the programme. Triaster and Verax are other companies offering "self-help" change planning, management and measurement tools.

Systems integrator Xpert, which recently pulled off a successful management buy-out from its Irish parent company, says that the Institute of Directors and the Department of Trade and Industry were valuable sources of help. The IoD runs courses that can help with change management, while the DTI has a booklet detailing the responsibilities of newly appointed directors. In addition, one of Xpert's suppliers, BT, is sponsoring the company as it executes a skills audit among its staff and provides additional training where this is needed. The government also offers subsidies of around £150 for employees to "upskill".

Local Chamber of Commerce offices are a good first port of call for advice on getting help with change management, while banks can be a good source of impartial business advice.

Legal help and insurance advice could be important if an IT organisation is moving into services contracts which can be a legal minefield.

Finally, Cranfield School of Management's information systems group offers an intensive training programme aimed at enabling business leaders to better manage change. The six-day programme costs £3,200 plus VAT.

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