To grow, consulting firms must prove ROI, says annual report

Regardless of market, industry, or service, consulting firms have one thing in common: to be hired, they need to prove their worth for their clients, in terms of both money and time. To come to this conclusion, talent optimization platform The Predictive Index surveyed 152 consultants from firms of all sizes.

“The findings of the Annual Consultant Report echo what we hear from our network of over 200 talent optimization firms: everyone wants to grow their business, and pairing strategy and people consulting are essential to driving business success,” Rabih Shanshiry, vice president of partner success for The Predictive Index, said. “To be successful, our partner consultants find that grounding proposals with measurable outcomes ensures clients feel confident they will see return on investment (ROI)—which increases growth and retention.”

In consulting, however, proving ROI is no easy task – but it is seen as an all-important one, with more than a quarter of respondents believing that companies choose not to hire firms because of difficulty proving their worth. Only 18%, for comparison’s sake, believed firms’ high costs played a role in such decisions.

How, then, can consulting firms show tangible results regarding their effectiveness and impact? The answer is rather simple, according to The Predictive Index: become indispensable. Using data gathered and analyzed in the course of their work with clients, consultants can concretely and definitively measure ROI. Once this has been accomplished, it can be used to as a pitch to hook new clients. This creation of a so-called “learning organization” – in which consultants take what they have learned from clients and use it as leverage – is not only greatly beneficial when it comes to proving ROI, it can also help shape the way firms approach future opportunities and map industry or market landscapes.    

A concrete measure of ROI can also help firms when it comes time to determine a pricing structure. According to the report, nearly half of firms charge by the project, which is fairly standard.

Surprisingly, 19% of respondents – the third-largest percentage – said they or their firms charged based on performance. This indicates “clients’ increasing focus on having a clear ROI on consulting services” – and serves as a wake-up call to firms who have not yet set out guidelines or benchmarks for its measurement.