Consultants can be a useful and cost effective resource for companies. They meet short term needs for specific expertise without the associated complexities and regulatory requirements of an employment relationship. There are three general reasons why companies hire consultants.
A need for expertise
There are situations that arise where companies do not have the in-house expertise required for a specific undertaking. It is usually an activity that will not be required to be performed on an ongoing basis and therefore does not require an employee to be engaged.
For example a business that has outgrown its rented premises may decide to construct its own new premises. In this situation a company may decide to use a consultant to manage the construction project. Rather than employing a project manager they can have the project completed without incurring the expense of a continuing employee.
A company may also use a consultant where there is a continuing need for the expertise but it is not present within the organization currently. In this situation a company may use a consultant to meet both the immediate need for expertise and to transfer the required knowledge to in-house staff. This type of consulting engagement is often used for new system implementations.
A need for resources
Sometimes a company will have the expertise but not the additional resources needed to undertake a task that is important and urgent. Companies experience peaks and troughs in business activities and the need for specific skills. At lower levels it is not unusual to employ temporary staff to meet peak needs.
When these peaks occur in specialized areas companies will use consultants in the same way they would use temporary staff for other activities. For example the media relations area of a company may maintain a permanent staff level to deal with ongoing media and public relations activities but employ consultants to develop a new product launch.
While the staff of the media relations department could develop the new product launch it would be at the expense of other business media needs. If new product launches are not a regular and recurring activity it does not make sense for the company to carry additional resources permanently for this activity.
A need for an objective assessment
Major change can impact a company positively or negatively. Often when a company is considering a major change in structure or direction they will engage consultants to review the proposed change.
While the skills to examine the feasibility of the change are usually contained within the company a consultant can provide additional assurance that an investment in a major change proposal will deliver the benefits expected, or identify risks that may have been overlooked. They also often provide recommendations or suggestions for how risks can be further reduced or benefits expanded.
Consultants provide a service to companies who have a short term requirement for specific expertise. Companies will generally choose to use consultants because they see them as a cost effective alternative to maintaining a larger workforce than is required for business as usual operations.