Measuring value is the next frontier for advisory practices
Listen carefully, and you can detect a change in the way that partners at the Big Four talk about their advisory work. Just a few years ago, “value” was not a word you heard consultants use a lot — or, at least, not of their own volition. The expectation was that if you did good work and met stakeholder expectations, the creation of value for your clients would be a natural consequence.
Now, however, that way of thinking has been wholly jettisoned. It is difficult, in fact, to find an advisory partner who doesn’t have value creation somewhere near the top of their agenda. Some firms have gone as far as launching strategic value creation initiatives to teach consultants to spend less time on box-ticking exercises and more time asking clients hard questions about which activities will genuinely add value.
As a result of this, our recent report, The Value Problem, found that 81 percent of clients say the consultants they work with from the Big Four talk to them about the topic of value either “frequently” or “very frequently.” Nevertheless, those same clients remain unconvinced that all of that pontificating is actually paying off: Only 41 percent of them are confident that the value created by their projects exceeds what they have to pay in fees.
How to cut through this particular Gordian knot? If there is one thing really holding these firms back from being able to convince clients their advisory work represents value for money, it is the lack of an appropriately robust and nuanced approach to measuring value. Until their value-add can be fully quantified, clients will remain skeptical that consultants do enough to justify their often eye-watering day rates.
Despite the general hesitation of clients to say consultants deliver a net ROI, most are extremely positive about the experience of working with them. If you approach the question of value from a different angle — if you ask clients, for example, whether their consultants helped them to create products faster than they could have done on their own, or whether working with consultants allowed them to do things they wouldn’t have been able to do themselves — a much rosier picture of the industry emerges. Clients’ general negativity about value does not mean that value is being destroyed; rather, it suggests that too much of the value generated by consultants is failing to show up in the metrics that project stakeholders are tracking.
It is easy to see why this has become a problem for advisory services in particular. Unlike, say, accounting, consulting projects tend to be highly bespoke: They do not lend themselves well to cookie-cutter metrics. Moreover, the nature of the industry is such that it is often impossible to appreciate the true value of a piece of work until years after the fact. That new corporate strategy the consultants left you with could be pure gold dust or refined snake oil; you won’t know until you start putting it into practice.
Yes, it’s easy to demonstrate value when you’re working on a project that has a direct and indisputable impact on costs and revenue, but those projects are as rare as unicorns. Firms need to grapple with the challenge of measuring value when the benefits generated by a project are less tangible: What numbers can you point to if you want to demonstrate the scale of a mindset shift you have brought about by the end of a digital transformation project? How can you prove that the stakeholders you interacted with are now smarter and more capable as a result of working with your team?
Which metrics should be tracked has to be informed by the circumstances and objectives of the project in question. But that choice must not be made unilaterally by firms and imposed upon their clients. If buyers are to come around to this new way of thinking about value, they need to feel they’re part of a collaborative, upfront process of defining a shared measurement framework.
I was speaking to a senior partner recently who said her firm had encountered pushback on a proposal from a client because they had put together a project plan that was noticeably longer than the ones submitted by their competitors. But as soon as she was able to explain that those extra weeks were to allow for value-tracking metrics to be agreed on and for data collection processes to be set up, the client quickly dropped their objections. In fact, the whole experience made the buyer realize that the other firms in the running were not properly committed to delivering value for money. She easily won the work.
Of course, finding the right metrics to track is only half the battle. The hard part comes in building a credible case that links them back to cold, hard cash. You might have been able to prove to a client that your approach to tracking the “digitalization” of their workforce is statistically robust and methodologically sound, but it’s all meaningless if you can’t prove that the metrics you are using are predictive of future revenue growth or cost reduction.
This is why building up a track record of best practice measurement work is so important. The more historic data you have to draw on, the more correlations you can draw to longer-term financial success and the more convincingly you can portray yourself as a value-adding partner. Some smaller firms have already taken this approach: Proudfoot, for example — an Atlanta-based firm specializing in operational strategy and improvement — uses regular assessment exercises with existing and previous clients to power a real-time dashboard on its website showing a rolling three-month average of ROI generated by its projects.
The Big Four are probably some way off from being able to do anything like that, but it’s not an unrealistic dream. We live in an age where it sometimes feels as if everything in our lives has been turned into a statistic and gamified: Our watches tell us if we’ve burned enough calories for the day; our phones chide us for not getting enough sleep. If accountants don’t find a way to better quantify the value created by advisory work, someone else will. That alone should be incentive enough.