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What drives perceptions of value in consulting?
- Edward Haigh
Value = quality divided by price, right?
Possibly, but not according to our data. At least not always. Our survey of clients (to which we had over 9,000 responses) reveals their views about value to be far more complex than you might imagine. Before we go any further we should be clear that we asked them to describe value in relation to the fees they pay. Our question was: Do you get more than you pay in fees (if so how much more), about the same as you pay in fees, or less than you pay in fees?
Let’s start with the relationship between quality and value. It seems reasonable to assume that it’s going to be very hard to convince a client you’ve delivered them lots of value if you haven’t also delivered them high-quality work, unless your prices are unbelievably low. Which they aren’t, aren’t they? And on the whole, that idea seems to hold water. If we map all responses from our survey onto a chart showing increasing value on one axis and increasing quality onto another (as we’ve done below), there are very few responses where you’d expect there to be very few: in the top left-hand corner. That’s where quality is seen to be poor, but value is seen to be high. Bear in mind that red means few responses and green means lots.
In fact the biggest number of responses tend to coalesce around quality being high, but not very high and value being roughly the same as the fees paid. Note that although there are relatively few responses that fall into the four boxes in the top left-hand corner, there are some. 362 in fact. That’s 362 people who described quality as either “poor” or “very poor” and value as being either five or ten times greater than the fees they paid.
Let’s throw something else into the mix, given that we can’t entirely discount the idea of those 362 people thinking the fees they paid were so low that they could get loads of value without getting anything in the way of quality from consultants. Let’s show the same chart based on responses about McKinsey only. We’re picking on McKinsey because it seems fairly safe to assume that the firm’s prices wouldn’t be low enough to allow that scenario to happen.
Hmm…same deal. The responses are still grouped towards the bottom right-hand corner of the chart, but there are still some (68, in fact) in the top left-hand corner. Unless we assume McKinsey has started knocking out consultants at bargain-basement prices that should be impossible, shouldn’t it?
Let’s not get over-excited about this: the chart still broadly shows that you can’t persuade a client you’ve delivered lots of value to if you’ve delivered poor quality work. But clients who are unimpressed with quality and impressed with value crop up time and again. Nordic clients, for example, are less impressed with the quality of work they get from consultants than their counterparts anywhere else in the world, apart from those in Switzerland. But they’re more impressed with the value they get from consultants than clients anywhere else in the world, apart from those in the Middle East. Are Nordic clients fantastically cheap? Seems unlikely.
So, let’s go looking elsewhere to see if we can find other answers about what drives positive perceptions of value. Let’s start by isolating the three firms that, according to our survey, are the most likely to be described by clients anywhere in the world as delivering value in excess of fees: Oliver Wyman, Bain, and IBM Global Business Services. Now let’s have a look at how perceptions about these firms as a group differ from those about everyone else in terms of a range of attributes. The figure below shows the difference between opinions about this group of three firms and about everyone else. So, for example, they’re about 7% more likely than other firms to be thought of positively where their methodologies are concerned. It’s important to note that clients are more positive about these firms generally, but it’s what they’re most likely to be more positive about that’s of interest to us.
The differences aren’t huge but they are revealing. Top of the list are these firms’ responsiveness and flexibility, and the speed at which they deliver. That tells us little about how good the work done by these firms is, but a lot about what it’s like to work with them. Note also that culture comes next.
The reality is the value is a notoriously difficult thing to measure. That’s why we ask clients such a simple question about it: what we lose in nuance we gain in them being able to answer the question, because most clients seem to have a hunch about value. They seem to have an instinctive sense about whether they’re getting more, less, or about the same as they pay in fees. And it’s looking increasingly like that they get that sense from what it’s like to work with the firm, rather than simply the quality of its work. All of which, somewhat embarrassingly, makes me realise that the answer to what drives perceptions of value was known as long ago as 1982, and by Bananarama of all people: It ain’t what you do it’s the way that you do it. And that’s what gets results.