Utilization of consultants on the rise

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“I come from an environment where, if you see a snake, you kill it. At General Motors, if you see a snake, the first thing you do is hire a consultant on snakes.”- H. Ross Perot, former director of General Motors

According to the Bureau of Labor, an estimated 8.5 million people – or 6.7 percent of the U.S. work force – are independent contractors, consultants or freelance workers. The Internal Revenue Service defines consulting as “the provision of advice and counsel,” and IRS reports indicate that business consulting is one of the fastest-growing industries worldwide.

Corporate downsizing has created scores of displaced workers who have turned to consulting as a way to make a living. However, the National Bureau of Professional Management Consultants, according to the Department of Treasury, reports that 70 percent of consultants new to the industry drop out within the first year.

The IRS lists 35 consulting fields, from accounting to labor relations to public relations. There are numerous generalized consultant associations, such as the American Association of Professional Consultants, and associations specific to each field, such as the Association of Noise Consultants. There are consultants who find consultants. Consultants are problem solvers and advisors, and, given the competition, their niche must be well defined and their background indicative of their expertise.

One consulting field that defies its occasional connotation as a “fluff” service is tax-credit consulting. Most companies are interested in saving money and paying the least possible to Uncle Sam, but in-house tax experts are normally on board in America’s largest corporations, said Steve Cook, owner of Business Consulting Concepts. Cook is a Colorado Springs-based tax-credit consultant, and he defined his consulting business, which he initiated in 1984, based on former employment and an extensive knowledge of tax regulations.

Cook worked for the Colorado Department of Labor and Employment for 14 years as an employment service representative. He advised many business owners about ways to save money through federal and state tax-credit programs. He also worked as a liaison with the National Alliance of Businesses, advising about various government-sponsored work programs.

Cook became a consultant because business owners did not have adequate information about existing federal tax programs. “I can take my knowledge of these programs to the companies and help them reduce their tax liabilities,” Cook said. “There are all kinds of tax credits available.”

The Work Opportunity Tax Credit program, for example, provides employers tax credits for recruiting and hiring hard-to-place individuals, including parolees and Social Security Disability recipients. The Welfare to Work program encourages employers, through tax credits, to hire long-term welfare recipients. Cook said the latter program could reduce an employer’s federal tax liability by as much as $8,500 per hire. Tax credits for companies that build offices or structures in enterprise zones are available as well, Cook said.

Researching, applying for and implementing tax credits can be overwhelming to business owners inundated with daily operations. Business owners and managers do not have time to do it on their own, Cook said. His clients have no upfront costs because Cook charges a percentage of what he saves the company on taxes.

Cook’s clients are generated through word-of-mouth referrals and tax credit proposals that are mailed to companies. Cook does everything for his clients, from beginning to end. In addition to providing the forms and submitting them, Cook also screens potential employees to ensure they fit the criteria for federal hiring credits.

Cook said he is a “slave to his business,” but the opportunity to meet people and the freedom and flexibility is well worth the commitment.

That commitment level distinguishes the professionals from the amateurs.

Springs lawyer John Buckley also owns a consulting business, Thunderbird Corp. Buckley, a former Air Force fighter pilot and instructor at the Air Force Academy, left the military in 1987 for Harvard Law School. After graduating in 1990, Buckley worked as lawyer for a large corporation, but discovered that corporate law was not his passion. He left the corporation in 1991, and, with a command of Arabic language and one year of Islamic law under his belt, he became a consultant for American companies doing business in the Persian Gulf. Buckley aligned with various companies and negotiated contracts for medical supplies, furniture and other post-Gulf War necessities in places such as Saudi Arabia and Kuwait.

Because of his Arab friends at Harvard, Buckley developed an understanding of Middle Eastern culture. International consulting requires knowledge of the country’s business practices, religion and dress, Buckley said.

Harvard legal contacts helped pave the way, along with Buckley’s penchant for sales and marketing, to what he refers to as an “elite consulting practice.” He now concentrates on his corporate law practice, but said most of his money was made in consulting. “I enjoyed controlling my own life as a consultant; on the other hand, there was occasionally a lack of control negotiating contracts for other companies,” Buckley said. “But consultants determine their own fate.”

Capstone Inc. determined its destiny as a large consulting company 10 years ago. Capstone’s headquarters are in Broomfield, Colo., with a satellite office in Santa Monica, Calif. The national cost-consulting company retains 35 consultants and contracts with others. Jim Bolin and Helen Roe are principal partners in Capstone, and both said success in consulting is based on conforming to client expectations, providing responsive services, negotiating competitive, fair fees and keeping up with the latest technologies and practices.

Capstone provides design and construction cost analysis and scheduling and project cost management to clients such as Centura Health, the management company for Penrose/St. Francis Hospital. Bolin, an engineer, said that, once the architect has been contracted for the design, cost consultants are brought in to ensure the design is consistent with the budget. “Sometimes an architectural design can be too outlandish, which creates additional expenses,” Bolin said. “We are engaged on the early end of the design to make sure the architects are falling into place with the original design.”

Capstone also offers cost-control services for individual projects. Consultants stay with a project from beginning to end, informing owners and managers about the ongoing financial outlook, Bolin said.

Roe said the advantage to companies that use consultants is hiring the expertise of a well-rounded individual who has worked with many clients. “And we aren’t tainted by corporate politics,” Roe said. “We can give the company an honest, unbiased and objective evaluation.”

That objective opinion is a key reason that corporations look to outsiders.

John DiCola is a senior vice-president with Catholic Health Initiatives, the co-sponsor, along with Adventist Health System, of Centura Health. Denver-based DiCola contracts with experts for projects that involve strategic planning, feasibility studies and acquisitions analysis. “We like to bring someone in who gives us an objective opinion with fresh eyes,” DiCola said. “Sometimes we need work done in a short amount of time, so we bring in a consultant.” DiCola said the health care corporation might bring in a “specialized expert with a deeper background” for a senior study or oncology or rehabilitation studies. “As the issues regarding heath care have increased, the pace of using consultants has picked up,” he said.

Perot had a notion that consultants were a growi
ng facet in the work force when he made the statement about General Motors. Although there are not many snake consultants, there are a few consultants selling snake oil.

DiCola hires consultants based on their connections to other companies and word-of-mouth referrals. “Always check references,” he said. “If you match the right consultant to the right job, it usually means a good outcome.”

- Editorial@csbj.com