CSI - Center for Strategic Initiatives
CSI - Center for Strategic Initiatives

Management consulting – a waste of money or a valuable service?
Written by Alikhan Baidussenov, Darmen Joltai
July 1, 2019
The market for consulting services is relatively untapped in our country due to its recent post-independence entry and consequent rise of the free market.

As much as the value of consulting services to clients is relatively proven and settled, the questions on whether or not they are financially justified remain unanswered. When optimizing costs, firms and state agencies first cut expenses on consulting services, trying to hire or train their own experts in the interim. While that might makes sense from a financial standpoint, but the quality of the output of experts more often than not aren't tantamount to the quality of the consulting services in terms of generating insightful analysis and recommendations.

Recent rise of relatively less costly consulting services and their constant improvement already can and even should serve as the catalyst of economic development of the country. 

Why consulting?

Consulting is about advising managers on a wide range of issues by independent external experts to solve a particular problem. In a market economy, such services are an important and integral element, since it is the experts involved who can suggest the most effective ways of development or propose non-trivial ways to solve problems.

In the wake of a thriving economy, it is important for businesses to constantly adapt to the changing market and try to exceed customer expectations, while increasing their income and optimizing costs. For government structures, it is important to have a constant dialogue with its people, understand real issues in a variety of sectors.

One might reasonably ask - why do companies and state agencies hire consultants "from outside" rather than solving their problems themselves? At first glance, business and government seem to have sufficient number of experts and specialists with their own ideas.

The answer is much simpler than it may appear – specialists are busy with their daily work and often just do not have enough time. In addition, self-assessment has its own deficiencies in that government agencies or businesses tend to make limited evaluation and does not provide an opportunity to make an all-round assessment of the situation. That is where consultants come into place – to provide an external bird-eye view of the current status and propose ways of achieving desired outcomes based on cross-sectoral expertise.
Consulting and internal expertise
There are two models of working with consultants. You can hire external consultants or create an internal consulting practice from existing employees.

Quite often the company comes to the conclusion that there is a constant need for changes and, accordingly, a demand for project consulting. To limit long-term dependence on consulting companies some organizations are setting up in-house consulting.

The main advantage of using this model is that in the long term, internal expertise is cheaper for the company itself. Moreover, employees have a better understanding of the specifics of the organization, and, unlike external consultants, in-house specialists are always involved in the implementation of the developed recommendations.

Hiring external consultants also brings benefits. First of all, external consultants are independent, free in their judgments and assessments. This is the value of professional consultants - they say what is supported by the facts, and not what the client wants to hear.
Consultants, unlike internal specialists, have experience in project work with several companies in different markets and, possibly, in different parts of the world, therefore they rely on the rich experience of completed projects and bring more creative solutions into the table. Even more so, consultants work in specialized consulting firms, where they undergo rigorous selection process to be able to work in the company.

As a result, consultants tend to have a higher level of knowledge and experience, mainly because they are completely focused on their role as a consultant and are involved in a variety of projects in different industries and parts of the world. Finally, consulting companies have a wide selection of international experts for projects. They are more flexible in terms of the selection of the project team.

It is a consulting company that is better at acting as a catalyst for change: it will act more decisively than an internal specialist or departments would, without looking back at personal relationships and old business processes that suited everyone in the company.

Consultants are best suited for large-scale projects that require deep industry knowledge, or when an organization needs an additional independent perspective on a problem. Another "psychological" reason for hiring a consulting company might be that the company's management will value recommendations more that came at costs, and will probably more responsibly implement consultancy firms' recommendations.
Consulting in Kazakhstan
In Kazakhstan, the market for consulting services emerged about 20 years ago, shortly after independence. At first, international consulting companies "captured" the market, the public sector hired only foreign consultants, paying them large sums under contracts. It was believed that there is no internal expertise in Kazakhstan, although in foreign companies represented in the country, 9 out of 10 employees are Kazakh citizens.

Recently, the situation has begun to change. Domestic consulting firms grew stronger, developing their own methodologies, and accumulating more experience in consulting activities.

To solve long-accumulated economic and social problems, Kazakhstani business and government are increasingly turning to local consultants. At the same time, there is a rethinking of the tasks and functions of consultants, who are required not only to develop recommendations, but also ensure their proper implementation.

In our practice, as local consulting firm, we were involved in projects when companies needed help in the completion phase of a project. The company initiated the project internally, but could not complete it and defend it in front of shareholders. Our experience and the competence of our employees helped to resolve this issue.

Analyzing our own consulting experience and having learned more about the market, we can conclude that the state now more than ever needs to look for and nurture its own experts, including consulting firms. This means that the consulting market will develop, and Kazakhstani companies will continue to gain strength. At the same time, it should be understood that foreign consulting companies have entered the Kazakhstani market, having hundreds of projects around the world behind them, proven practices and methodologies and a wide pool of experts. Kazakhstani businesses and the state should effectively use both foreign and domestic consultants.
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