5 Questions for Choosing Between a Small vs. Large ERM Consulting Firm

Irrespective of your personal view of consultants, they’re necessary at times. It is simply impossible to have every skill set available when needed, hence the reason for bringing in outside help.

Besides general reasons outlined here, your company may hire a consulting firm to set up an ERM program, conduct a program effectiveness assessment, facilitate a workshop, implement an ERM system, develop risk appetite for strategic goals, you name it.

It should be a foregone conclusion that hiring an ERM consulting firm will translate into your desired outcome at the lowest cost and fastest time possible, but this unfortunately doesn’t always happen. Prior articles have focused on different aspects of outside help, such as what to look for in an ERM consultant, different approaches for responsibly outsourcing ERM, and even how external consultants are treated differently by executives.

However, one area I’ve only touched on briefly is choosing between a small boutique firm (e.g., Strategic Decision Solutions, Melody Advisory Services, and Five M Consulting) and one of the Big 4 (i.e. KPMG, EY, PwC, Deloitte) or even a firm like Protiviti or Gartner. While I certainly have preferences based on my own personal experiences in hiring consulting firms, today’s article is not going to bash large consulting firms. (There’s plenty of material online that does it pretty succinctly and clearly.)

Instead, the following 5 questions are meant to help you understand what you want out of an engagement so you can choose the right type of ERM consulting firm the first time.

One principle I’m always trying to get across with readers and clients is to begin with the end in mind. In the context of today’s subject, understanding what you want and need to get out of an engagement is a huge step in hiring the right ERM consulting firm the first time.

Question #1 – Is your challenge related to tasks that require large numbers of people or do you have gap in knowledge on a specific area?

This first question is a huge driver in choosing between a boutique or large ERM consulting firm. Ask yourself whether your needs are rooted in a specific task or some other ‘production’ challenge? Or do you have a gap in knowledge or expertise?

Large consulting firms will be focused on, and therefore better suited for, the production challenge. As explained in a book I highly recommend, The Executive’s Guide to Consultants by David A. Fields, larger consulting firms are rooted in a production economy model where vertically integrated economies of scale drive success. What this means for our subject today is, similar to a manufacturer, large consulting firms like those mentioned above bring a wide range of capabilities and manpower under one roof to optimize efficiency.

If you need a large number of people to complete a certain task as fast as possible, the larger firm will likely be the best choice, with one caveat I’ll mention here in a minute.

On the other hand, smaller firms are rooted in what is called the knowledge economy, which has become quite prominent in the last couple of decades. As opposed to a production model, expertise in a variety of areas does not lend itself to scalability. However, what you get in this situation is a premier expert with first-hand knowledge of the challenge, an expert who is better equipped to guide you to a successful outcome.

A large firm like Deloitte will simply not have this same depth of knowledge.

Now to that one caveat…

Part of the reason larger firms are able to scale and grow is they often use a template approach or otherwise copy-and-paste a deliverable previously created for another client. Depending on the challenge, larger consulting firms will lean on best practices, which isn’t always the best approach.

Question #2 – How much do company leaders value “brand” names?

One tendency many of us have is to choose brands with name recognition and extensive reach. I personally do this with hotels for example; unless it’s personally recommended, I feel more comfortable staying at a Marriott hotel over a smaller or local hotel I’ve never heard of. There’s assurances that the hotel will be kept to a certain standard…

The same is generally true between a small and large ERM consulting firm. Everyone knows who Deloitte, PwC, McKinsey, and Aon are.

However, while you may have the power of a large, global brand, you won’t necessarily be getting the right expertise for the challenge. Similar to the knowledge economy concept mentioned in the previous question, small firms will have deep expertise on a small number of challenges. They will be able to bring their best to bear on your challenge. Many founders or leaders of small consulting firms got their start with one of those global brands (but not always!).

Since they are about maximizing productivity, larger firms will assign whoever is available, not necessarily who is best suited, for the task at hand. On top of that, it’s likely someone younger with minimal experience will be assigned to work on your project, while the experienced consultant or partner who closed your deal will move on to the next prospect. If you really want that partner on your project, be prepared to pay astronomically for their time and attention.

Question #3 – Will you be handling implementation or maintenance long-term?

This question is really looking toward the end of an engagement to determine if the output will require additional implementation and subsequent maintenance over the long-term. This is especially relevant for those companies who want a new ERM system or new processes like risk analysis.

If your project falls into this category, there will certainly be a need for ongoing support, which is something you’re typically not going to find with a larger firm. What typically happens with the larger firms is they do the work and then they leave, which is okay in certain situations.

However, in other situations like the ones mentioned above, knowledge transfer from the consultant to the client will be needed to ensure a seamless transition and overall success over the long-term. Larger consulting firms don’t typically do this, partially because of what we discuss in #2 about less experienced consultants doing the actual work. Without knowledge transfer for those situations where it is necessary, you the client are left with a stack of PowerPoint slides collecting metaphorical dust.

Talk about wasted time, money, and effort!

Smaller consulting firms, on the other hand, will often build this knowledge transfer into engagements and walk side-by-side to help you not only understand what you’re doing, but also why you’re doing it.

Question #4 – How specific or unique is your challenge?

Another question or point to consider when evaluating a small vs. large ERM consulting firm is the specificity of your challenge.

In short, the broader or more generic your challenge is, the greater the chance a larger firm will be the better choice. A good example of this is designing a risk management job description progression ladder. This is a pretty straightforward task of making sure there are good descriptions for multiple levels of an ERM team member to get promotions as an individual contributor then up through the management ladder.

However, smaller firms will be better suited to address very specific or unique challenges, provided they have the expertise. It’s more difficult for a junior partner from a large firm to navigate the nuances of risk culture and personalities that are so vital to getting to the bottom of both risks and opportunities.

Just keep in mind that you should not automatically write off a smaller firm because it appears they don’t have the exact expertise in-house. In these cases, the firm leader can simply lean into their networks to find the right fit – both knowledge, experience, and personality.

As an example, while my specialty is in ERM and strategic planning, my firm has been able to take on projects focusing on business continuity, cybersecurity, and others because I was able to lean into my extensive network to find the SME to do the job, and do it right.

This ability reflects the agility smaller firms naturally have over larger ones. Firms like the Big 4 are like huge ships that require a lot of effort to change course. Also, many will say they “do ERM” when, in fact, their specific ability to “do” ERM is rather limited because they spread themselves over so many areas.

Question #5 – Do company leaders value a long-term relationship or are they focused more just getting the immediate project done?

The answer to this question will vary wildly depending on the company’s culture.

If executives and managers value relationships, then they will not like the larger firms as they typically rotate staff in and out. You may have a particular manager you liked working with at Deloitte, but ask yourself – what are the chances that person will still be there in a year, and even if they are, what are the chances they’ll be assigned to work with you?

Smaller firms are typically built through relationships. In some cases, the consultant will work closely with the client for years, developing a deep level of trust and creating a win-win situation for both parties.

As you can see, choosing between a small vs. large ERM consulting firm is by no means an easy decision. Like other decisions, asking questions like these will help your company narrow down the best option with the greatest likelihood of success.

Beginning with the end in mind and asking questions like these and others will ensure you find the right firm the first time.

Has your company ever had a consulting engagement that yielded less than desired results?

If you have a consulting story you would like to share (good or bad), I’d love to hear from you. Please join the conversation on LinkedIn or send me an email.

If you’ve gone through these questions and determined that a small, agile ERM firm with a strong network is the best option for helping you achieve your goal(s), please reach out to me directly to discuss your specific situation and potential solutions.