Often, just as important is the ability to recognize the wrong vendor or consultant. In fact, personally, I might rather miss out on the most qualified so long as I know I am not getting someone who is not qualified at all.
I could highlight some things to look for or even make a list, but I'm going to take a different approach. Everyone seems to like illustrative stories. So, let me give you one that I recently encountered where I'll change the names and fact patterns a bit to protect the innocent ... and the guilty.
A mid-sized company (let's call them National Widget or NW) issued a request for proposal (RFP) for assistance with developing the components of an employment agreement for a potential new CEO. As is good practice, they issued the RFP to five prospective consultants (five is not necessarily THE right number, but it is certainly in a range of reasonable) asking among other things for
- Project methodology
A key place that National Widget went wrong is that the three people making the decision on choosing a vendor didn't really have experience in this area. Of the five companies that received the RFP (all responded), three were name-brand firms, one was a niche firm specializing in consulting on executive issues, and one was a firm (WCDA (I'll explain the acronym later) that had done good work for NW on a health insurance related project.
I thought that three of the proposals (two from the name-brand firms and one from the niche firm) were good enough that if I were choosing, I would have been comfortable with them. Let's consider the other one.
Big Firm B (BFB) came in with the lowest fee quote. In fact, it was the lowest by a wide margin. The proposed staffing on the assignment consisted of two relatively junior consultants. Their bios pitched that they had MBAs from top-5 programs. When the proposal discussed experience, it didn't mention any assignments related to CEOs. It also didn't reference any assignments related to employment agreements. And, the proposal was filled with fancy graphics laying out the project methodology and timeline. What is was missing though was anything that would have convinced me that the two young rising stars actually understood the assignment. Fortunately, NW chose not to engage BFB.
As I see it, there were a few red flags here:
- If there is one fee quote that is far below the rest, consider whether the people preparing that quote understand the entire assignment.
- Why are they quoting that low? Are they overly tightly scoping and then going to nickel and dime you on extras to make it back?
- When a proposal that doesn't need pictures and graphics to explain itself is filled with them, what are the bidders using the visuals to hide?
- Does the staffing chosen seem to fit the proposed assignment?
Now let's consider the WCDA proposal.
It was delivered by the project lead from the health insurance project. It spent two full pages telling NW about all the money that WCDA had saved NW on their health care costs. It played up the fact that WCDA has more than 50 employees who have passed their FINRA Series 7 exam. We learned that they also have 11 employees with PhDs. Further, of the three people assigned to this project, two would be chosen from among that group with PhDs (I'm not knocking attainment of a PhD; that's a tremendous achievement.). Finally, the proposal from WCDA pointed out many of the different types of projects that their firm had completed in the last twelve months including a business valuation on behalf of a private equity firm, development of a new e-commerce platform for a new fantasy football oriented company, and a conjoint analysis of employee preferences related to volunteerism opportunities.
Note the red flags:
- Most of what was in the WCDA proposal was unrelated to this assignment.
- WCDA highlighted credentials and qualifications that were irrelevant to development of an employment agreement.
- WCDA led with a reminder that it had helped to save NW money in an unrelated area.
The bad news was that NW hired WCDA. What I didn't tell you was that the closing sentence of WCDA's proposal was, " For NW, We Can Do Anything."
Well, WCDA may think they can do anything, but the fact is that they didn't understand this assignment. In the recommendations that they delivered, WCDA spent a full page explaining that they are
- Registered Investment Advisors
- Chartered Arbitrators
- Fellows of the World Coffee Drinkers Association (there actually is a World Coffee Drinkers Association, but I chose it for the WCDA acronym)
WCDA's recommendation report was long. It needed to be to justify the level of fees. It contained lots of filler, or fluff, if you prefer. What is was short on was substance. That shouldn't come as a surprise, though, because WCDA's proposal was also short on substance.
The end result was that National Widget couldn't use the work that WCDA had done for them. They had to go out and pay a second firm to do the work properly. The red flags were waving right in National Widget's face, but they chose not to see them.
Don't make the same mistake. Engage qualified people who understand what you are looking for.