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Business Consulting Tragedy: Paid For Failure

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In dire need of a new payroll system, the Los Angeles United School District (LAUSD) engaged Deloitte Consulting to the tune of $55 million. Why did they end up paying nearly ten million more?

The problems and overruns during implementation caused an uproar in the ranks of teachers and employees, who demanded remedy. LAUSD agreed to another $9.6 million to fix the issues, spending that money (once again) to pay Deloitte.

An editorial from the Los Angeles Times explains the problem.

© Flickr user Martin Terber

The system was supposed to bring efficiency and flexibility to district payroll systems. Instead, it has created the dispiriting spectacle of teachers and other district employees slogging downtown to register complaints and make sense of their paychecks. Back in April, the waits for help averaged nearly five hours; about the only good news the district has to offer lately is that the wait times have fallen to just over two hours. Still, problems persist. Not surprisingly, as employees have missed mortgage and rent payments, concern has mushroomed into outrage. The breakdown has, one board member told The Times, “contributed to the worst demoralization and cynicism I’ve ever seen in this district.”

The details of this story are incredibly complex, and attempting to place blame with either the school district or with Deloitte would be irresponsible and unhelpful. However, this is a case of dramatic, expensive change executed by consultants which did not occur as planned. Process improvement is supposed to make things better and cost less money overall, not make them worse and be more expensive.

Many stakeholders are upset at the turn of events. The decision to pay Deloitte to help resolve the problems continues and reinforces the relationship between the two parties. Although there is no agreement on who is at fault, this choice fuels discontent because whichever group you blame is still involved.

Businesses and consulting firms will forever have a shared interest: to drive major organizational change in an efficient and cost-effective way. But when the two parties don’t do their homework up front, the opposite can occur, like this conflict between the LAUSD and Deloitte.

LA skyline

© Flickr user MargaretNapier

So how can your business avoid this kind of disaster? The answer isn’t avoiding change or consulting firms. It’s making sure to do your homework up front.

  1. Make expectations clear from the beginning. Don’t wait until contract time, or worse, when things go wrong, to voice your expectation. Consultants should know the exact frameworks you expect with regard to completion time, money spent and product received. Similarly, consultants need to be up front with any objections or issues with their ability to deliver.
  2. Establish regular “check-up” communications. Start with a “kick-off” meeting where all the principals review the expectations and timelines. Then proceed with agreed upon regular check-in conferences to make sure everything is going according to plan. This can turn potential roadblocks into speed bumps and keep a project on time and on budget. Most importantly, it eliminates any explosive surprises in time or cost overruns.
  3. Employ good conflict mediators on the project. With any major change, conflicts will inevitably arise within the process. Too often, the parties dig in their heels and a major roadblock occurs. Businesses need to realize they hired a consultant in the first place because they don’t know something. Failing to at least listen to the advice of the consultant is foolhardy. On the other hand, consultants need to adhere to the axiom “the customer is always right.” Their job is to deliver what the customer wants. The consultant can certainly provide their expertise and even warnings if necessary, but that should always be tempered with the reality that it’s the customer that ultimately must live with the results.

Business consulting firms may want to consider an alternate model for building partnerships—one based on shared risk. And businesses should contact AccelaWork before engaging a traditional consultant for organizational change.

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