Consultants are professionals with expertise in a particular field who offer advice related to their experience. Consulting, then, is the business of providing advice to clients in order to solve a problem or range of problems within a particular area of business. The majority of consultants have gained their expertise from previous employment. A former stockbroker might become a financial consultant; computer scientists might become computer consultants; a former employee in a nonprofit organization might begin a business as a fund-raising consultant; an accountant might become a tax consultant. Many professionals must be problem solvers to effectively discharge their duties, and thereby gain experience making them prime candidates to become consultants.
Expertise alone, however, does not make one a consultant, at least not on a full-time basis. To be a consultant, one must be able to apply one's expertise to practical problem solving. Consulting, moreover, is a business, and consultants must have marketing skills and the ability to reach out and establish job contacts. Personality also plays a role in consulting success: people who can put the needs and interests of clients before their own, who are not condescending, and who are unfailingly courteous and patient have the best chance to become successful consultants.
As an outgrowth of the "information revolution" of the late 1970s, the consulting profession is relatively new. Increased use of computers has made a vast amount of information available and has changed the way companies do business. Using their expertise, consultants find information and "package" it for their clients. A small minority of consultants work as internal consultants; they work for one firm only, usually a very large one. The majority, however, work independently and with no partners, often from their own homes, or they run their own consulting firm.
The number of both consultants and consulting firms has grown rapidly in recent years. Even after the recession of 1991-92 officially ended, large and small companies continued to "downsize," as many of them found it less expensive to hire former employees as consultants than to keep them on the full-time payroll. Consultants constitute a growing number (as yet undetermined since there are no licensing requirements for consultants) of the self-employed, who in 1990 made up 13 percent of the workforce. According to the American Consultants League, from 1993 to 1994 the consulting field grew by over 400,000 men and women, approximately 150,000 of whom became consultants after losing their jobs. The vast majority of these new entrepreneurs were found to be between the ages of 35 and 55, and many of them had formerly served as mid-level managers. The American Management Association also reported that, in 1994, 56.7 percent of U.S. businesses spent more money on consultants than they had during the previous year. By 1995 U.S. companies spent $11.4 billion on consultants.
According to the American Consultants League, the failure rate for first time consulting businesses is extremely high, with 91 percent of new consulting firms failing in their first year. Consultants who do succeed, however, usually earn as much if not more than they did in their former employment. Reasons for failure are often a combination of such factors as poor initial planning, ineffective marketing, and intense competition. The successful consultants, however, are those who find a market niche for themselves. This is not just a matter of luck, but of prior research, intensive marketing, and, at times, of locale. Charging the right fee and avoiding falling into the trap of "free" consulting (as in the case of a client whose contract with a consultant has ended but who still desires additional "feedback" or "follow up" on the work) requires business sense. Consulting fees can vary from almost nothing to several thousand dollars per assignment, depending on the assignment, market conditions, and the accepted rate for the type of work done.
By the same token, many consulting projects fail due to a misunderstanding of the role and function of consultants on the part of corporations. Successful use of consultants requires: setting of specific performance goals for the consulting project; definition of the project to fit the expertise of the consultant(s); and division of the project into small, readily finished portions. Companies have also found that less can be more in consulting projects, as it is more efficient to have as much of a consulting project done by their own staff as possible, using the consultants only to provide input within their particular area of expertise. Finally, it is essential that consultants function as part of a "team" formed with corporate personnel assigned to their project.
Since the vast majority of consultants are self-employed professional businesspeople, consulting typically requires long hours and is done under much pressure. One's field of expertise must be studied continuously to keep abreast of developments. To the millions who enter the consulting profession, the attraction and the challenge of creative, independent work, done in a comfortable environment (often in a small office or in the home) outweigh the difficulties. And while competition is great, the number of large firms that dominate this profession are few. Thanks to the advent of home computers, consulting as a business has "downsized," with the average number of employees per firm falling steadily since the 1980s. While some markets have become saturated—such as those for computer and environmental consultants—there are always new trends emerging. For instance, with the unexpected fall of communism, the demand for East European specialists and "free market" consultants skyrocketed. Hence the need for information keeps escalating, and the demand for consultants keeps growing.
[ Sina Dubovoy ,
updated by Grant Eldridge ]
Connor, Richard A. Marketing Your Consulting and Professional Services. 3rd ed. New York: Wiley, 1997.
Karlson, David. Consulting for Success: A Guide tar Prospective Consultants. Los Altos, CA: Crisp Publications, 1991.
Kelley, Robert E. Consulting: The Complete Guide to a Profitable Career. rev. ed. New York: Charles Scribner's Sons, 1986.
McCune, Jenny C. "The Consultant Quandary." Management Review 84, no. 10 (October 1995): 40.
Schaffer, Robert H. "Make Consulting Pay Off: It's Time for a New Deal." Industrial Management 39, no. 6 (November December 1997): 1.
Weiss, Alan. Million Dollar Consulting: The Professional's Guide to Growing a Practice. rev. ed. New York: McGraw-Hill, 1998.