As a partner at Corporate Insights, I have often said that I do not want to be the biggest but would like to be the best. My sense was that you could not be the best and be the biggest at the same time. This belief was supported every time I ate at a chain restaurant. I had the privilege of eating at a Chili’s, Olive Garden, and Subway before they became the massive franchises they are today. Their food was outstanding back then but with expansion came compromise. I am not the only one who thinks this way, Budweiser ran an unsuccessful campaign suggesting that they were once a micro-brewery too, suggesting that their beer was just as good as the small brewer (I would be ecstatic if one of our huge competitors ran a similar campaign). I posed the question in the SIOP (Society for Industrial Organizational Psychology) Group “What are the advantages of small consulting firms (5-20 consultants) over the larger firms?” I wanted to know if I was alone in my rationalization. Here is a summary of thoughts:
- Flexibility: Several people noted that the large firms have created “best practices” and formulas. These formulas allow for mass production and create incredible margins for the larger firms. We actually picked up a client from a larger firm who would not go off script to customize an assessment. For them, the hit on their margins was just not worth the effort.
- Price: It seems that larger firms have also created a significant amount of overhead. If they are public, the expectations are even greater. In response to this pressure, they hire market analysts that help them maximize their pricing. Little guys don’t have the luxury of a market analyst and, according to one responder; little guys price about 25% less.
- Response Time: When a company chooses the little guy, most likely they become one of 10-15 clients. When you are 1 in 10, your phone calls are returned immediately and your projects are done on time. When you are 1 in 1000, the urgency within the firm is less. For us, losing one client has a major impact on our success, for our larger competitors, losing one client barely moves the needle.
- Relationships: This last item was also the most commonly identified. The little guy knows you by name, knows about your family, hobbies, and sports teams. Larger companies use a project manager, often fresh out of college as a primary point of contact. Once these project managers gain the experience, they head off to the next stage of their careers. With the little guys, you always get the same person and, in our case, that person has a doctoral degree and knows your situation well. “Rain makers” will court you in the beginning and be available for meetings with senior management, however, it’s the much less experienced junior consultants who do the grunt work — and yes that is a form of bait and switch. Spiral bound presentations can be impressive, but the devil is in the details.
- The big consultants tend to value experience at the large consultancies more than corporate experience, so they tend to hire from one another. On the face of it this seems reasonable but because many of their consultants have not sat on both sides of the desk, and so they may not understand that the success of HR programs not only rests on their excellence of design, but on carefully thought out and executed communication plans which fit the culture of the organization. (Thanks Paul Oliva for this insight)
- Big firms prefer the latest off the shelf solution as a means to maintain their margins. If an important HR initiative is not specifically designed to support the culture of the organization, it is doomed to be a short term solution, not long term practice. The smaller firms will take the time to understand the culture of the organization so that they can design the right HR or reward solutions.
- Larger companies lead to what one SIOP professional called “the-foot-in-the-door syndrome”. He suggested that once a larger firm has a gotten into a client organization, they could leave relatively unproductive resources there for an extended period to network, and seek out additional opportunities for the firm. These prolonged engagements are often costly, unnecessary and undesired. Smaller firms while certainly valuing long-term relationship with clients cannot afford to have their resources tied up and unproductive if they wish to survive and be profitable.
The advantages of the larger guys also came up. For example, we have about 350 different subscales in approximately 50 assessments. I once heard that a competitor had over 800 tests. We can deliver in 4 languages, English, Spanish, Portuguese and Danish. Another of our competitors has assessments in 19 languages. For a nationwide roll out, we have people in 6 cities and three countries, forcing me to fly 138,000 miles in 2011 to deliver our services to other locations. Our largest competitors are in every major city in the world. I think you get the picture. If flexibility, price, response time, and relationships are of primary importance, consider the little guy. If scope and “boots on the ground” in every location takes precedent over these four, it may be safer to stick with the big guys.