Need an expert? Tips for picking an outside adviser.
1. The services of an outside adviser are costly and perceived as unnecessary.
2. Management believes it has a greater understanding of the inner workings of the company's operation, customers, vendors and employees.
3. The outside adviser often lacks specific expertise in the industry, but rather is a generalist and often credentialed as an accountant.
4. The risk that mismanagement will be discovered and jobs are on the line.
As a result of these primary and other concerns, the decision to seek outside advice is sometimes delayed to such an extent that decisions, which are made in the interim, are often wrong and based on a lack of facts or inaccurate assumptions.
In the business problem-solving process, as in life, the more facts one has, the more accurate the conclusion and ultimate decision: lacking all the facts or making decisions based on inaccurate assumptions will lead to a wrong decision time after time.
What to look for
The properly credentialed and experienced outside adviser is critical at an early stage of the decision-making process. The adviser's experience can be tapped as needed throughout the problem-solving period with restrictions on time to be devoted in those areas where management seeks support. The extent and nature of the services should be well defined in an engagement letter that is specific to the role the adviser is expected to play, the time spent in performing the role and the cost, either on an hourly or flat fee basis.
The flat fee speaks for itself. The hourly rate should be established and these fees should be billed weekly, supported by detailed time registers clearly describing the services and the time spent on each area. While most professionals break out time registers in tenths of an hour, it is usually unnecessary to break time registers in smaller increments than quarter hour segments for these types of services. Keeping the cost down is one of the ways management can justify engaging outside support for the problem-solving process.
A valuable tool
Long detailed reports, memos, financial statements, etc., can be reduced to summaries. If the outside adviser is the right choice, they will quickly arrive at the "bottom line" of the problem and based on the summary, be in a position to offer suggestions. Some will confirm management's assessment and solutions, others may not and should be able to clearly explain why that course of action is possibly not the best. Either way, management has purchased a valuable tool.
Beware of the adviser who seeks long-term engagements, equity, a bonus, full-time employment or a board position. These are not the kind of advisers who are usually the most valuable. When any adviser promotes any of these areas, they begin to lose their independence and, as a result, their objectivity, and seek to serve themselves rather than your business.
The time to bring in an adviser is when problems first begin to unfold. In the problem-solving process, which in itself takes time, time is the most valuable ingredient. Better early than late for engaging the outside independent adviser.
James V. McTevia is founder and chairman of McTevia and Associates Inc., management and financial consultants, in Eastpointe, a member of the Detroit Regional Chamber.
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|Author:||McTevia, James V.|
|Date:||Jul 1, 2005|
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