Internal Consulting

In-house advisory units came to prominence as a counterbalance to the thriving external consultancy industry. Since the first wave of internal advisors shook up the consulting scene in the 1980s, their successors have evolved quickly, winning business from elite consulting firms and even expanding beyond their own firms, offering services to external clients.

American companies have traditionally had a type of internal advisor in place, paid to cast an objective eye over operational efficiency, spending habits or IT strategy. Following the consulting industry’s explosive growth, internal advisors were increasingly called upon to replicate the performance of external consultants, providing a viable and cheaper alternative.

Internal advisory units soon sprung up across all functional areas of an organization. Today’s internal consultants are more than a pair of neutral eyes roaming around different departments, they are strategists, scientists, analysts, systems developers and IT specialists who execute in-house consulting services.

Corporate giants — including Google, Samsung and IBM — may regularly hire external consulting firms, but they also boast their own crack in-house strategy and operations teams. These units are reserved for specific projects that demand deep company knowledge and a level of confidentiality. They are not small units either, often boasting more than 100 trained consultants.

The vast majority of companies and organizations, however, have not built internal consulting units from scratch, but may assign an in-house specialist to a consulting role if the need arises. These specialists routinely possess job titles which make no mention of their consulting role. In many cases their advice is taken for granted as part of their broader functional responsibility. If such informal ‘consultants’ were included in a headcount, the internal consulting industry would easily outnumber the combined rank and file consultants working for external clients.

This anonymous army of informal internal consultants will likely continue to expand its corporate footprint as firms expect more multitasking and diverse input from their employees. But the distinct field of pure internal consulting continues to evolve, becoming more professionalized as companies invest heavily in their in-house advisory, expecting to save money on external consultants in the long run, and cultivate top talent within the organization.

Alternatively, some companies now offer employees the opportunity to take on consulting roles on a flexible basis at different stages in their career. This comes as part and parcel of a broader career development strategy and helps firms develop their human capital by ensuring that each functional specialist is also in command of some consulting experience.

Regardless of whether companies use in-house specialists who put on their consulting hat every now and then, or boast handsomely paid and fearsomely experienced internal consulting units, there is a clear market trend towards having at least some in-house consulting capacity. Much of this is driven by the demand to scale back on external costs. But its is also increasingly important for a company to have the internal capability to implement frequent change and transformation.

So successful are some internal consultancy units that they offer services to external clients. Many often compete with leading consulting firms even for contracts within their own company, with clients’ expecting a healthy dose of competition to maximize value and keep in-house consulting teams on their toes. The end result is that internal consultants constitute, alongside technology and innovative startups, both a constitutive and disruptive force within the traditional consulting industry.

What does an internal consultant do?

Internal consultants have a substantially different relationship with their clients. They are typically either on the client’s payroll, or owe them embellished duties of loyalty and confidentiality. This can have a substantial or negligible impact on how internal advisors work, but generally, their functions are precisely the same as external consultants.

Depending on the project they may be called upon to advise on, develop and implement strategies across all managerial and organizational departments, at every stage of the supply chain. Internal advisors are a fixture of all consulting industry segments, from HR to IT and strategy. They may also be off-the-books consultants, offering specialized advice but without the extra job title. In some cases, such as that of MHP outlined below, they may operate virtually independently of their ‘bosses’, and even perform services for rival firms.

Consulting Industry