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Internal consultancy units often manage the project elements of head office away from the strategic centre and create a new focus for change.

These consultancies take several forms and link to the main business in a variety of ways. The key to an effective internal consultancy is clarity about the unit’s purpose and how it will work.

Vision and purpose

One vision to increase business change capability involves developing and cycling talented staff through the unit.

In this case the unit drives towards an overall capability lift, rather than simply providing cost-effective project resource.

An internal consultancy can provide a central professional change capability to deliver the strategic direction.

This statement makes several principles explicit:

• Professional - trained and capable people who reliably deliver change initiatives
• Central - a part of head office
• Strategic direction - a clear indication that the unit’s purpose is to deliver critical and core business change.

How might it work in practice?

Internal consultancies vary from five people to over 1,000. A large unit typically comprises 20 to 250 people operating out of its centre, or from several sites around the world.

Alternatively the unit could consist of a small core of full-time people with a flexible network of internal expertise, pulled into projects as required.

Internal consultancies reduce the need for external support and some offer consultancy to other companies.

Offering external consultancy as well as internal is politically fraught and can create tense internal relationships around pricing, availability and the consulting unit's own strategic direction.

But internal consultancies also benefit from some external consultancy support to expand their own knowledge and experience.

How to judge success?

All business units must monitor success and the consulting unit could judge success through costs, time to complete projects, staff satisfaction and so on. In addition the unit should seek user feedback on client satisfaction.

The unit should adopt some external consulting good practices, in particular contracts. These specify what is to be delivered, how and by when and is agreed by the client and lead consultant.

Good contracts helps set and manage expectations and provide a vehicle to review progress and quality of delivery.

External consultants invoice clients on a pre-agreed basis (day rates or fixed-fee) but there are two schools of thought about payment for internal consultants.

One view is that no payment need be made since internal consultants are employees and a payment mechanism is an unnecessary overhead. This may work fine for small consulting units.

Large internal consultancies generally have a cross-charging mechanism to control and monitor costs.

Even though cross-charing payments are internal transactions, they do provide a commercial edge to consulting relationships and cost of service can be compared with external providers.

However, this cross-charging can become an industry in its own right and create a significant overhead for the company to do business with itself.

Staffing

Staff are recruited internally or externally, perhaps from a consulting firm.

Having a mix of experienced senior staff, younger staff with development potential, and a few external hires creates a good balance.

Each member of the unit will have their own speciality (e.g. human resources, operations), adding consultancy and change skills.

If the vision is to increase change capability for the business, then an explicit developmental aspect should be built in to people's career plan.

This vision influences the choice of staff to populate the unit, how they are managed and their personal development.

To increase knowledge diffusion some people should be rotated through the unit to gain experience - and then take their knowledge back to an operational business unit.

Pressures for internal consultancies

Internal consultancy has its own pressures, notably managing political interfaces between clients, implementation teams and the general business organisation.

Coaching is invaluable as people find their feet and become effective in meeting the demands of operating in this special internal role.

Communication about the unit needs attention, both on start up and as the unit develops.

Expectations are set early, so the unit should be given the best chance of success through thoughtful communication and updates as internal consultants begin work.

Sensitivities and jealousies about the chosen few may arise and the selection process to join the unit must be transparent and fair.

In addition, expectations should be set about the longevity of the unit.

If a time horizon is suggested (say five years), then the unit can be disbanded without loss of face for unit members i.e. it has done what it was set up to do.

Summary considerations

Start up

• What is the long-term vision of the unit?
• What must the unit achieve?
• What role will the unit play within the management process e.g. implementing strategy?
• Who will sponsor the unit and develop its performance contract?
• What relationships will the unit have with senior executives?
• How will the unit be monitored?
• How many staff should the unit contain and from what disciplines/functions/work units?

On-going

• How will the business hear about the work of the unit?
• How will new people be selected to join the unit and how will they be trained?
• How will people move back into the main business?
• How will the unit capture learning and make it available?

June 2006

The key to setting up an effective internal consultancy is clarity about the unit’s purpose and how it will work.

Good contracts helps set and manage expectations and provides a vehicle to review progress and quality of delivery.

Internal consultancy carries its own pressures, notably managing political interfaces between clients, implementation teams and the general business organisation.