The Selection and Control of Management Consultants by Small Business Clients

Abstract

Using the evidence of a large-scale survey of consultant assignments, selection is shown to depend chiefly on repeat business and referral from third parties. Traditional advertising and mailshots account for only 11% of selection, with the Internet and websites so far accounting for less than 1% of selection. Multinomial logit estimation demonstrates that selection depends chiefly on intensity, cost and duration of assignments, and is little influenced by the type of firm, type of consultant, or the field of the assignment. Where government intervention has occurred through Business Link, this chiefly influences selection by the availability of subsidy, not by accreditation of its consultants or the provision of information about consultant quality. The control of consultancy assignments is predominantly by contracts, and mostly by standard contracts. Even if personal contact and previous use of a consultant is important in selection, small to medium-sized enterprises (SMEs) exert close contract control over consultant costs and outputs. This confirms other studies that show that contracts often support rather than replace relationships of trust.