In 2013, BNP Paribas had five professionals on their U.S. in-house consulting team. Now, they have around 75 individuals. That's in line with my own observation that in-house consulting and strategy teams are on the rise. In many ways, in-house consultants share a similar value proposition with in-house legal counsels, posing the question: Are they headed in the same direction?
There's no reason to expect any change, right?
Last year, in-house legal counsel spend surpassed outside counsel spend in the annual Chief Legal Officer Survey conducted by Altman Weil, a boutique consulting firm serving legal organizations, for the first time. The survey showed law departments spent 48% of their budget internally in 2018, while outside counsel received 45% of budgets and the remainder went to non-law firm vendors. In-house legal counsel spend was up about 8% compared to 2011 (the earliest available survey with a comparable cut of the data).
As self-evident as these figures may seem now, there was a time when few companies saw value in in-house legal counsel. The percent of lawyers participating in private industry held steady for some time: 10% in 1960, 11% in 1970, and 10% in 1980. At first glance, it seemed there was little reason to expect change. However, some leaders aren’t afraid to break the mold and do things differently. That leader came along when Ben Heineman took over as General Electric’s senior vice president and general counsel in 1987. GE’s famed CEO Jack Welch gave Heineman the go-ahead to grow their in-house legal counsel. By the time Heineman left GE in 2006, the company had over 1,000 lawyers. Had GE’s legal department been a freestanding law firm, it would have ranked as a top 20 firm.
In-House Consulting And Strategy Teams
A 2015 Harvard Business Review article highlights how organizations like Cisco, Google, IBM and Samsung are utilizing in-house consulting groups. Similarly, Bayer, Merck and T-Mobile report 160, 70 and 60 consultants, respectively, on their in-house consulting teams.
While it’s difficult to come by data tracking the growth of in-house consulting and strategy teams, simple LinkedIn searches for “in-house consultant” and “in-house consulting” yield thousands of former McKinsey, Bain, BCG, L.E.K. and Oliver Wyman consultants at high-profile companies such as Anheuser-Busch InBev, Pfizer, AECOM, Gallagher, BNP Paribas, Zurich and Marriott.
Why is this happening?
When they're thinking about building an internal consulting team, most CEOs I’ve spoken with tend to zoom into two topics: cost and talent.
In my experience, standard consulting engagements with well-known strategy consulting firms tend to cost $75,000 to $150,000 per week for a team of three to five consultants. These fees equate to an average annual cost per team member of $750,000 and up. Companies can hire internal consultants for a fraction of that cost.
Besides cost, organizations seek to bring high-potential talent into the organization by giving them opportunities to work across a few different business segments. While discovering where they’d like to develop their career, these individuals also learn the skills they need to be effective leaders. Former American Express CEO Ken Chenault, who himself started his career in their strategic planning group, noted in a Fortune interview that this group has been a talent feeder to the rest of their organization: “I’ve watched many alumni of the strategic planning group move throughout the organization and have enormous impact on our success,” Chenault said. “Behind many of our most impressive triumphs, you find people from strategic planning.”
What are other considerations?
If you are a leader considering an in-house consulting or strategy team, what other considerations should you take into account besides reducing cost and growing talent? I advise looking at the following factors.
• Utilization
Are there specific skills you will not need all year round? Will you get more productivity out of a specialized consultant rather than a generalist? For example, if you only need a sales force effectiveness consultant every three years or so, it will probably cost you less to hire that skill set externally.
• Talent Quality
Will the quality of talent you hire to your internal team be better, about the same or lower? I have seen all three scenarios play out. One company I worked with found they were getting good quality at the partner level when working with external firms, but they were not impressed with the junior team members that accompanied the partner and found they could get better quality hiring internally.
• Retaining Know-How
One reason many individuals join consulting is to gain exposure to a wide variety of industries and topics early in their career. When working with external firms, junior team members tend to be rotated between clients regularly. Every time this happens, new vendor team members need to learn about your issues from the beginning and are getting paid (yes, by you) to do so. In addition, all this know-how walks out the door when the engagement is done.
• Speed
Building a team from scratch takes time. If it’s costly to wait, it may very well make sense to go with an external option.
• Ownership
As most corporate leaders discover, it can take months or years before an initiative is fully implemented and the results become visible. For most initiatives, it’s simply too costly to keep an external consulting team for such a period. When key stakeholders face roadblocks to implementing the vendor’s recommendations, the external consultants are long gone. In-house consultants, however, allow knowledgeable team members to follow up with internal key stakeholders over a longer period and ultimately see their recommendations through.
Do things differently.
If you are a leader thinking about building an in-house consulting team or strategy function, my advice is “do things differently.” Don’t wait for another update from me in five years to see if other firms have done it. If it makes sense for you, give it a try. My suggestion to those who choose to build an in-house function is to be clear on what success will look like. You don’t want to look back two years from now and try to figure out if the team has been worth the investment or not. It’s better to be clear on these criteria upfront.
