What Do Business Consultants Actually Do?

Let’s venture beyond the fancy suits and MBA jargon to find out

What do business consultants actually do? The answer every consultant will tell a client is “It depends.”

And it’s true. Consultants and consulting firms come in all shapes and sizes and some do very specific things in very specific industries, others are jacks of all trades. Those of us of a certain age will surely remember the 1999 cult classic movie, Office Space, where the two Bobs come to Initech and start asking employees tough questions:

These guys are the consultants every work-a-day employee fears; the hatchet men who come to downsize a company. They do exist, but more commonly consultants are hired to improve efficiency and make things run smoother. In fact, during my years as a revenue cycle consultant working in a hospital settings, I saw the work being done by consultants actually help employees by making their jobs more automated, less frustrating, and often more transparent so managers could see how well they were performing. But I still haven’t answer the question, “What do consultants actually do?”

Reducing Inefficiencies (in Theory)

A major theme for business consultants is reducing ‘waste’. This term comes from the manufacturing methodologies Lean and Six Sigma in which efficiency and accuracy are the ultimate business goals.

There is a lot that goes into these methodologies but ‘waste’, in this context, can be wasted time, wasted energy from employees, wasted materials, wasted space, etc. It’s basically the act of being inefficient in a process.

Having to physically move people or materials around more than is actually needed, holding too much inventory that isn’t being used/sold and is taking up space, or waiting too long for a subsequent step of a process because the previous step isn’t moving fast enough, all adds up to wasted time, energy, and money.

Here’s a simple theoretical example; let’s say Company A manufactures action figures on an assembly line and they are made in 3 main processes; the creation of a figure body, the creation of a figure head, and the assembly of each to make the finished toy. If the folks making the bodies crank out 1,000 a day (step 1), the workers making the heads churn out 500 a day (step 2), and the people putting everything together complete 250 action figures a day (step 3), then the first two steps will start to generate excess materials because a finished doll can’t be assembled fast enough to keep up with the production of the parts.

In this scenario, not only is there a cost to storing the extra figure parts not being used to make a finished product, but there is also a cost associated with not using the workers to do other productive tasks instead. Steps 2 and 3 are holding up the efficiency of the entire process.

Reducing Inefficiencies (in Real Life)

This is a very simple theoretical situation to illustrate a point but let’s use a real world example.

When I worked in hospital revenue cycle consulting I focused on patient access processes, which simply put, are all the business processes that happen before a patient sees a medical professional in a hospital for a scheduled visit. This includes scheduling a patient, taking their insurance information, verifying that the insurance is valid, and then getting an authorization from insurance (an tentative agreement from the insurance company to pay for at least some portion of the patient’s visit). Hospitals generate revenue from this process and without an insurance authorization, the chances of getting money for a patient visit drastically decline.

Each task depends on the previous one to be complete for the entire workflow to be successful. More often than not, these tasks would happen in a vacuum and the employees downstream wouldn’t get the information they needed fast enough to do their jobs well. The result would be patients showing up for appointments without authorizations from their insurance for the visit, which meant they had to pay the full medical bill out-of-pocket. Many times the patient wouldn’t pay the bill, which would then go to collections, and the hospital wouldn’t get paid. So in the end, everyone loses when the process breaks down.

Connecting the Dots

Connecting all these tasks so the employees got what they needed from those upstream was sometimes very simple, and sometimes very complex. Sometimes it was as simple as creating a formal process that included the involvement of employees and managers from different departments who had poor communication with each other. For example, making the scheduling department accountable for sharing all the patient appointments for the next two weeks each day so the authorization department had plenty of heads up to reach out to insurance companies and obtain the crucial authorizations.

If you’re reading this and thinking this example is a no-brainer, well, it is. To an outsider. The status quo can be very powerful though. More often than not, the reason I’d hear for why an inefficient process was in place was because it had just always been done that way. From my experience, most people work hard and want to do a good job, but sometimes folks get into a routine and the longer they do said routine, the harder it gets to imagine doing things any other way. Many times it just takes and outsider to point out that there is a better way.

Using Technology

Another way business consultants reduce waste is by implementing new technologies. So many times I saw departments in the same hospital using different computer systems/software that served similar functions but they couldn’t share data between the systems. It was also shocking how often I saw modern hospitals using fax machines or paper copies of documents to share patient info. Granted, in healthcare there are lots of rules to protect patient information, but still, there are also lots of new ways to safely make things more efficient with technology.

I’ll be candid here, everyone HATES getting a new software program to learn…at first. It’s almost universal. It’s understandable, we are apped to death these days. But there are simple, easy to use tools for businesses of all sizes available that make organizing, sharing, and managing information easier. Many an employee has fought me tooth and nail to not use a new software at the start of a project only to later confess that it has made their job so much easier and they love it.

A word of caution though; without first strategically designing the processes that will be complemented by a new technology, one could just be making things more inefficient. A new software shouldn’t blindly be seen as a silver bullet, but instead should be another item in a holistic toolbox.

Finally, using new software platforms helps business consultants prepare for another big part of the answer to the question, “What do consultants actually do?”

Creating Key Performance Indicators (KPIs)

There are lots of buzzwords for this concept; key performance indicators, business intelligence, metrics, etc., but it just boils down to creating easy to use data to help managers make decisions based on something more concrete than gut feelings.

Business consultants are usually very practical and there is nothing more practical than numbers. On the other hand, some businesses, especially small ones, make decisions based on instinct. In my experience, you need both to make the best decisions possible.

KPIs are just numbers and can represent anything in a business but they should represent critical processes or aspects that make a company successful. For example, in a real estate firm a KPI could be number of days on market for properties.

If properties are on the market too long they start falling into that category of waste that was previously mentioned, it’s essentially inventory that is taking up time and money. Realtors are spending time showing people a property that isn’t selling and employees are spending time and money marketing the property through different channels. Using this KPI, managers could single out properties that are past a certain time threshold and use the data to decide if the price needs to be lowered or other changes need to be made to help make a sale.

KPIs usually revolve around sales, revenue, and costs because those are standard measures of success in the business world, but they aren’t the only measures of success.

Defining What Matters

A good business consultant is always going to want to know about profit and loss numbers, but they should also help define other aspects of a business that are important to success.

For example, a mission driven organization (like a non-profit) often defines success by the number of community members served or some other outcome based KPI. A few years ago I created and ran a short program in Eastern Europe, which was funded with grant money from the European Union, and the funding was given with the stipulation that we needed results based KPIs.

The program focused on reducing intolerance towards the Muslim community of Eastern Europe so the KPIs needed to reflect positive changes in attitudes within the participants. Using survey questions we were able to show that participants had a much better understanding of the religion and it’s culture and also had a much more positive view of Muslim people than before taking part in the program.

So as you can see, KPIs can really reflect any aspect of a business and they are a crucial tool that consultants use to help managers and owners understand what is happening in a business and make informed decisions on strategy. And speaking of strategy…

Defining Strategy

There’s no set way to run a business. MBAs spend an insane amount of money getting a degree in something that is an art, not a science. That being said, the art of business can be worth a lot of money so having a good strategy in place is absolutely crucial. While consultants can help with almost any aspect of a business, defining a strategy and ensuring a company is keeping to the plan is always the most important.

Despite what the average person might think, starting a business is actually quite easy. It’s really just a matter of filing the correct paperwork, usually with the state of Delaware. But having a vision of what the business will be and then creating a roadmap to get there, well that’s a different story. I’ve worked in entrepreneurship education at Harvard and Rice University and teaching people to have an “entrepreneurial mindset” was the cornerstone of everything we did. And while that’s a cool sounding buzz term, it really just means thinking strategically about one’s business.

One can see this emphasis on strategy play out by simply watching a show like Shark Tank. There is always an entrepreneur that makes it through a well rehearsed pitch but gets eaten alive by the sharks when they can’t answer questions about their market size, go-to-market strategy, or most importantly, their per unit costs. While the whole thing is a dramatized version of a pitch day intended for good TV watching, the concepts really are straight out of every business school education.

Knowing who your customers are (and shouldn’t be), finding a product-market fit, or developing a minimal viable product (MVP) aren’t the first instincts of most people when starting a business, but they are all concepts we taught would-be entrepreneurs to think through before rushing into opening up shop. Yes, a business can be successful without employing MBA jargon like this, but the fact is the more strategy entrepreneurs give to their business, the more likely they are to succeed. Also, most investors aren’t interested in funding a wing and a prayer.

Developing or tweaking a business strategy is a huge area of opportunity for most small businesses. Just like in aspects of operations, business managers and owners can get caught up focusing on day-to-day tasks and can often lose site of the forest for the trees. Business consultants can act as a fresh set of eyes to help point out the forest, and crucially, set a path to get to it.

Brass Tacks

To wrap up this blog, business consultants do anything and everything under the sun. In fact, I always tell the ridiculous story that while working at the second largest healthcare consulting firm, we had the largest consulting firm come in and give us recommendations on how to improve the efficiency of our meetings. But if you were ever wondering, “what do consultants actually do?” then I hope this at least helped draw the curtain back to provide some answers.