Demand for outside advice is growing due to fast-paced technological innovation, increased regulation, and new competition. Source Global Research said the U.S. consulting market grew by 7.7% in 2015, and it expects the industry to grow by another 10% this year.
Robert Half Management Resources surveyed 1,000 CFOs and found that 61% whose firms work with consultants said they are likely to bring in specialists for business system and performance improvement initiatives. Even in the core areas of finance and accounting, finance chiefs said there was more than a 50% chance they would bring in outside consultants to assist their operations. Many executives also said they anticipate needing more consultants to assist with finance optimization initiatives, risk, taxation, and governance and compliance. Paul McDonald, senior executive director for Robert Half, said as business systems continue to evolve and become more complex, many companies don’t have the in-house skills.
“Organizations frequently turn to financial consultants, particularly at the pre- and post-implementation stages, for their subject-matter expertise,” he said. “Their knowledge of different tools can ensure the system is optimized to deliver the financial and business data the company needs.”
The Journal article says chief financial officers are looking for new ways to expand revenue and profit while keeping costs low. In the process, they must weigh the costs of consulting services against the potential benefits those outside consultants can deliver. Source Global co-founder Fiona Czerniawska said CFOs are using consultants “like plumbers.” “They’re hired when there’s something wrong with your heating system and it’s not economically worth you training to be a plumber,” said Czerniawska.
Donna Carter, a former CFO who is now a partner with CSuite Financial Partners, told CGMA.com that companies are relying on more consultants for a number of reasons. There has been a rise in awareness about cybersecurity breaches and the increased use of technology means demand for more information. Businesses are also relying on them to help replace legacy systems and provide better analytics, and to help with compliance issues and risks as they move to more cloud-based systems.
While it’s a common tactic to look to temporary expertise, some experts say too much reliance on outside consultants raises questions about the management’s competence. Lawrence Hrebiniak, professor of management at the Wharton School of the University of Pennsylvania, told the Journal that top executives should already have the tools to cut costs, evaluate strategies and lead restructuring. “The C-suite should know how to do most of these things. They should know how to do strategic thinking,” he said.
Meanwhile, CFOs told CGMA that consultants have really helped meet their needs. Jackie Davidson, who was CFO of Market Leader Inc. until 2014, said she brought in consultants for major projects because staff couldn’t handle M&A due diligence on top of their “regular work.” Jim Blake, CFO of Morey’s Piers amusement park in Wildwood, N.J., said consultants can also be very helpful to deal with changing compliance and regulatory issues.
“When you have regulations coming at you left and right, and a limited staff, you have to get that expertise from outside,” said Blake. “They specialize in things I don’t…I’m not shy about getting help when I realize I have limitations.”