AT Kearney's Iowa PR Disaster -- Who is in the Wrong?
I was sitting next to Tony Poshek in the office this morning and he flipped me this story which I must say, I got a chuckle out of. Apparently, Iowa paid AT Kearney "more than $3.4 million" for a sourcing project which resulted in "fiscal year 2007 [savings] that were found in the auditor's report [totaling] nearly $2.9 million." This compares with a savings that Iowa and AT Kearney projected in the $10.5 million range.
What's the problem here and who is in the wrong? I'd say that it's probably not AT Kearney's fault (though, if history is any indication, their fees were probably significantly more than boutiques firms or other Big 5 providers which probably could have done a similar job for less). I'm guessing what happened is that Iowa failed to fully implement identified savings opportunities -- something that occurs far too much in strategic sourcing exercises led by consultants without skin in the game to make their recommendations stick.
In my view, this could have just as easily happened to any public or private sector organization hiring AT Kearney or just about any other sourcing consultant. My suggestion to avoid this type of thing is to make sure that your consulting partners play a key role in not just identifying savings, but implementing them as well. And base their upside on actual returns -- not just forecast ones.
- Jason Busch
What's the problem here and who is in the wrong? I'd say that it's probably not AT Kearney's fault (though, if history is any indication, their fees were probably significantly more than boutiques firms or other Big 5 providers which probably could have done a similar job for less). I'm guessing what happened is that Iowa failed to fully implement identified savings opportunities -- something that occurs far too much in strategic sourcing exercises led by consultants without skin in the game to make their recommendations stick.
In my view, this could have just as easily happened to any public or private sector organization hiring AT Kearney or just about any other sourcing consultant. My suggestion to avoid this type of thing is to make sure that your consulting partners play a key role in not just identifying savings, but implementing them as well. And base their upside on actual returns -- not just forecast ones.
- Jason Busch
The Iowa spokesperson says that they're looking at long-term savings of 8M+, and that Iowa is unconcerned about operational costs exceeding savings in the first year. If Iowa really had actually been promised 10M+ in the first year, it's hard to imagine that they'd be unconcerned. Something doesn't add up.
To the auditor's point that it is difficult to distinguish market conditions from initiative impact, that's always an issue in these situations. Naysayers will argue the former, as they always do.
Consultants are effective because they are agents of change. What they do may seem self-evident, in the sense that hindsight is always 20-20. Inside resources argue, "if I had been given the time to look at this, we could have done the same thing ourselves." Well, either you weren't given the time, or you chose not to do it. Either way, the consultants enabled the change.