Consultants and Numbers
Mike and Ian tackle the complex dynamics of consulting through the lens of numerical analysis, raising critical questions about the utility and implications of quantifying consulting work. They share their thoughts into how the obsession with numbers can sometimes obscure the bigger picture, leading to detrimental outcomes such as miscommunication with clients and internal teams.
The episode also trails at a forthcoming interview with Anne Fraser, who will provide further expertise on making numbers fit for purpose.
Ever been in 'Analysis Paralysis' mode? Ian and Mike are there for you!
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Transcript
Welcome to Consulting for Humans, a podcast all about life.
Mike:In consulting, you're with Mike and Ian, and in each episode, we'll be shining a light on a new topic that gets to the heart of what makes consultants happy and successful.
Ian:Right.
Ian:We think this job gets easier the more human you are.
Ian:So, on the Consulting for Humans podcast, it's our mission to add just a little more humanity to the lives of consultants.
Ian:We'd love to bring some of the skills and perspectives of consulting to other human lives, too.
Mike:So if you're a consultant who's trying to be more of a human as well as a better consultant, or a human who's trying to be more of a consultant, then we think you're just our kind of person.
Mike:Welcome, Ian.
Mike:In our opening series of episodes, we've already explored analytical skill and creativity, humility versus confidence, and a couple weeks ago, we got into a conversation about whether consultants should prize certainty or be comfortable with uncertainty and ambiguity.
Mike:Maybe those of you listening remember how we talked about swagging and picked up a few lessons from Marty, one of our favorite consultants from House of Lies.
Ian:That's right.
Ian:Well, that got us thinking that maybe we could take this particular idea a step further and use an episode to talk about more of the ways that consultants get into using numbers, sometimes for good and sometimes for not so good.
Ian:The kind of numbers that we get gather, that we analyze or estimate or report or forecast.
Ian:So, Mike, today in this episode, we're going to be talking about exactly that, consultants and numbers.
Ian:Mike, you and I have cut our fair share of reports and forecasts and spreadsheets in our time, but we thought that this topic called for a deeper level of expertise.
Ian:So we're bringing you a first today, an interview with our first ever special guest, our friend, colleague, and analytics guru, Anne Fraser.
Mike:We'll hear a little bit more from Ann later on, and we'll hear a lot from her in the extended interview, which we'll share with our followers in the luminaries tier.
Mike:Meanwhile, here are our questions for the week.
Mike:First, we all know the authority and confidence that comes from being able to quantify something.
Mike:But what are some of the downsides of always trying to put a number on something?
Ian:Right?
Ian:And what counts as fit for purpose when it comes to using numbers as part of a consulting project?
Ian:And what happens when our clients stretch that purpose and start to use numbers from our consulting work as targets or metrics?
Mike:And what other skills might we need to have to balance our capabilities and help our clients?
Ian:So, Mike, we've got Some really, really great questions here.
Ian:Let's dig into the first of those.
Ian:Let's talk about the pros and cons, maybe also the downsides of getting focused on numbers as part of our analytics.
Ian:Now, we probably already know, and certainly, Mike, you and I do, and I think most of our listeners do as well, we know the advantage that comes from being able to quantify what we found in our consulting work.
Ian:And we talked about this on our earlier episode, like you said, the episode on certainty, uncertainty and ambiguity.
Ian:Clients get a feeling of confidence that our analysis reflects reality.
Ian:If it contains a number, you can kind of see the logic there.
Ian:If you can quantify it, then you can measure it.
Ian:And if you can measure it, it must be real, right?
Ian:And I think clients also get comfortable that whatever we recommend has a good chance of having a positive impact if we've done something to quantify that impact, if we've talked about benefits and talked about business consequences.
Mike:And it's also a really good practice.
Mike:As we've said to our junior consultants many times in our careers, at the very beginning of a project, you need to be able to describe the connection between the project's work objective and the client's business objectives.
Mike:Ian, I remember one of your phrases, which I've always loved it kind of inscribed on my heart here is the clients need to be able to smell the money.
Mike:If you can't describe how your project is going to help clients make more money or make more money faster or spend less, slower, something tangible.
Mike:Get that sniff of money somewhere around this project.
Ian:Absolutely.
Ian:So that's a great moment, the outset of a project, the scoping, if you like, of a project is a great moment for us to think about quantifying what the business goal looks like.
Ian:But I think there are also some downsides and maybe we're going to dig a little bit here, Mike, into the psychology of consultants.
Ian:Once again, there are some downsides if our work focuses on numbers and nothing but.
Ian:For example, we can struggle to communicate complex ideas to people on the client side or even people in our teams who are non technical.
Ian:Those stakeholders that don't think in numbers will really struggle to grasp the relevance of what it is that we're talking about.
Ian:And that's because our clients find it hard putting numbers into context.
Ian:The same thing happens within the consulting project, but it has this effect.
Ian:We get trapped into analysis paralysis.
Ian:We miss the bigger picture because sometimes we as consultants can't put numbers into context.
Ian:So, Mike, two big reasons why numbers without context are a problem for us and why adding context is going to be really, really important to us.
Ian:This analysis paralysis thing is so important for us.
Ian:I've contributed and overseen and managed quite a few big scope overruns and budget overruns.
Ian:At least 50% of the big scope and budget overruns that I've participated in have been attributable to this problem of consultants going down a mine looking for numbers.
Ian:And Mike, this is in the modern era, right?
Ian:When we could actually get our ADHD diagnosed and treated.
Ian:Heaven knows what it was like back in the day.
Mike:Yeah, I could speak a little to that, but I don't want to incriminate myself.
Mike:Yeah, for sure.
Mike:And when we do this so often, it is, you alluded to earlier, the numbers and this metric fixation, they start to become used by our clients in ways that actually have unknown and sometimes negative effects on real performance here.
Mike:So, you know, we're going to get into a little bit more about Campbell's Law, this potential problem with using numbers as metrics, particularly single metrics to measure people's performance and thereby encouraging people to game this system.
Mike:We'll talk a lot more about that in luminaries and what happens there.
Mike:We'll talk about that with Anne as well.
Ian:Great.
Ian:Now I think this is a really interesting link now to our second question, which is how do we evaluate the fitness for purpose of an individual number or a set of numbers that we're working on in consulting?
Ian:And I can think of a few examples here, Mike.
Ian:If, for example, we are estimating a market size in order to help the client make a decision about whether or not to enter with a new product, then a fit for purpose number for the size of the market can have quite a wide range of uncertainty.
Ian:A fit for purpose number is one that gives us confidence that the size is at least big enough to get a return on investment of X, whatever X is.
Ian:Having more precision isn't helpful.
Ian:And I can think of lots of consultants who had to learn the hard way that precision is not the same as confidence.
Ian:Confidence that number is valid, or that it represents what you think it represents.
Ian:And since I'm talking about market sizes, let's keep rolling here.
Ian:If we're going to forecast a market size in order to set performance targets for a team, which is a different purpose, then the precision has a different role to play.
Ian:You might say in that situation, the absolute value of the size of this market, whatever, it isn't so important.
Ian:But our ability to measure changes in market share or contributions to growth in the market, that becomes really important.
Ian:Different purpose, different focus on the kind of precision that we get in the metric.
Ian:And I'm sure we're going to talk about this later, and especially with Ann in the Luminaries interview.
Ian:Mike, if we're using the number to pay individual incentives to make compensation decisions, maybe even to decide who stays and who goes, then suddenly our use of the number becomes super critical.
Ian:And that's where Campbell's Law and its close cousin Goodhart's Law, start to kick in.
Ian:Mike, Campbell's Law, Goodhart's Law.
Ian:You and I have spoken about them a lot.
Ian:Refresh our memories, would you please?
Ian:What are these laws and how do they relate to consulting and numbers?
Mike:Yeah, so Campbell talks about how metrics, especially metrics that are measuring social processes, tend to corrupt the process that they're meant to measure.
Mike:In other words, as I said, people game the system.
Mike:And there are all kinds of phenomenal examples of that.
Mike:We'll dive more into those later here.
Mike:Goodard's Law says that if a measure becomes a target, it ceases to be a good measure.
Mike:And I think it's kind of taking that one step further and really saying, so here's exactly what you've got here.
Mike:I think we both run into this on projects.
Mike:If you've wondered over the years what's happened to your Facebook feed sometimes Facebook, probably any kind of feed.
Mike:It's probably as a result of this effect of Goodert's and Campbell's Law.
Mike:If you wonder about the crazy things people do to keep you on hold or not on hold, and people begging you to give them five star reviews when they're not begging you or spending any time or effort to give you good service.
Mike:Campbell's in good earths, very good.
Ian:And if you want to get really big and really scary, look at the history of a company like Enron, which was chasing the stock price.
Ian:And all of the social behavior inside the firm was aimed at shoring up the stock price rather than doing the right behavior and seeing the consequences in the stock price.
Ian:Yeah, it's a famous, very extreme, but very famous case.
Ian:I think of the same thing.
Mike:And luckily we all know about this.
Mike:So you never see it anymore?
Ian:No, absolutely not.
Ian:Ancient history.
Ian:Never been known again.
Ian:So, Mike, what can a consultant do to get better at aligning the numbers that we choose to analyze with the purpose that we know that they're aimed at?
Mike:Well, I think we have to treat with caution any project where the client's keen on knowing the numbers but obscure about the use to which the numbers will be put because we can't fit to purpose unless we really understand the purpose and make sure the client does as well.
Mike:So we can explain the limitations and what's going on.
Mike:And so we make sure that we're giving them numbers that they can realistic work with in that context.
Ian:Yeah, very good.
Ian:I think also we can take care that our consulting work, that our scope, if you like, doesn't like carelessly evolve, I want to say carelessly evolve.
Ian:Move from estimating to target setting to performance measurement without any kind of a discussion.
Ian:It's a great thing.
Ian:Of course, when our consulting projects do evolve, like that's the success that comes from selling serial extensions.
Ian:But if the purpose behind the numbers changes at each stage, then you need to get really explicit involvement and buy in from people on the client side that we're drawing your attention to the fact that this number was something that we measured and now it's going to be something that we set as a target and we'll talk about what that means for how it's derived and used.
Ian:And I've spent many, many, many days and hours of my life, Mike, wrestling with this.
Ian:For clients who are trying to do both at the same time.
Ian:A picture of what the market might look like in the future and a picture of what our performance looks like today.
Ian:And it's caused some real blowups that I think we might get to talk about in our conversation with Anne in the Luminaries episode.
Mike:I think we have to always be ready for two very common and very important questions from the client to us.
Mike:One is why?
Mike:Why give it a number?
Mike:Why?
Mike:Why?
Mike:What makes that number true or valid?
Mike:And the other equally important question, so what?
Mike:What's the relevance of that number and how does it fit into the rest of our analysis and the decision we're trying to make and the action we're trying to take?
Ian:Right.
Ian:Well, Mike, this is a great moment for us to hear just a little bit of the conversation that we had with our friend Anne Fraser.
Ian:Let's hear what she had to say about good practice in making sure that our numbers really are fit for purpose.
Anne:That's another big fear that some junior consultants have is making mistakes.
Anne:Because when we do consulting, we're dealing with evidence and information and leaning to it.
Anne:And we know it's not perfect.
Anne:Not only that, we know we're not perfect.
Anne:And inevitably, if you're dealing with analysis and building up models and any kind of thing, we're going to make mistakes.
Anne:It's not completely preventing mistakes, it's how you handle when a mistake is made, I think is a big learning for junior consultants.
Anne:In fact, I remember distinctly I was a junior manager, first time managing, we had made a mistake and it had to do with reports that meant a person wasn't getting their bonus.
Anne:So it was a very scrutinized, deliverable.
Anne:Luckily we caught the mistake, but it had already gone out and I, for the first time I actually had to call the client.
Anne:And I was so nervous talking to the client.
Anne:She must have been able to hear that in my tone because she actually spent most of the call calming me.
Mike:Down to hear all of our interview with Ann and Ian and my continuing commentary here.
Mike:Take advantage of the seven day free trial and join our luminaries tier which will get you access to all of our bonus episodes.
Ian:Indeed it will.
Ian:So Mike, let's move on now to our third question.
Ian:What other skills might we need to have to balance out the capabilities that we offer to our clients to become, if you like, more versatile away from just being numerical specialists?
Mike:Well, I think that's always such a key question.
Mike:And here, similar to our earlier episodes, we're going to say broaden your skill set, don't over specialize, but instead also consider your skills at the opposite end of the spectrum.
Mike:So if you're a very precision focused consultant, work on developing a bit of strategic thinking and the communication skills that go with it.
Mike:If you're more on the conceptual side, you know, work to improve your analytical and quantitative abilities.
Mike:And my experience would add in here.
Mike:Be sure to work on teams that complement your strengths and give you opportunities to learn in practice.
Mike:It's one of the things that I absolutely love.
Ian:Yeah, that's a great point.
Mike:Yeah.
Ian:Put yourself in a project context with people that'll stretch you and help you learn.
Ian:That's great.
Ian:I think, Mike, we also need to be good at practicing flexibility and understanding what that means through the life of the project.
Ian:So that means asking carefully of ourselves and of the client right at the beginning of the project.
Ian:What's the purpose for the analysis here?
Ian:What's the level of precision that's going to meet the client needs and not necessarily anymore.
Ian:Keep checking in and make sure that stakeholders have the same view.
Ian:Because once you're in a project about which it is known that numbers will be produced in the output, people are going to start to pay certain kinds of interest all the way through the life of the project.
Mike:Yeah, and I remember the days of making sure that we had sample reports.
Mike:Here's not the data, but this is what it's going to look like because of that mismatch in expectations of what we were talking about.
Mike:Well, I think in addition to these things that we can do personally here, I want to emphasize improving data literacy because the field has just taken quantum leaps, I think over time here.
Mike:So both precision focused and conceptual consultants should enhance their ability to work with and interpret data effectively for themselves and for their clients.
Mike:The landscape of data analytics tools, including topics like visualization, is changing all the time.
Mike:So be keeping up with developments, stay up to date.
Ian:Yeah, I think if you're already an expert at a particular data analytic tool, you can also take it the other way and share your skills and share your tools with your colleagues.
Ian:That doesn't mean getting somebody else to substitute for you at work.
Ian:This is about sharing knowledge of application.
Ian:I remember once seeing a really great presentation by a pretty junior colleague doing a lunchtime talk about, I think it was adaptive conjoint analysis.
Ian:It was one of the flavors of conjoint and it was great.
Ian:And first of all, it really opened my eyes to what he knew and some of the great valuable skills that he had.
Ian:And it equipped me with enough knowledge about the technique to judge when I could apply it to my client situations.
Ian:But he also very smoothly didn't give me so much that I wouldn't be calling on him for expert help when the time came.
Ian:So it was a really smart way to share the knowledge and not something that I, as one of his colleagues, would have found at any place else.
Mike:Ah, well, in addition to what we're doing for and with the numbers, I think, Ian, we've got to also think about presentation skills.
Mike:I see so many folks, particularly folks who are good about this, who really are married to the importance of it, getting stuck thinking that their consulting deliverables should be spreadsheets or data tables or code, which is not really matched with the audience needs and expectations.
Mike:So really learning about presentation techniques that incorporate analytics into a story based presentation to a client is the proven way to actually get your clients to understand and remember and do something about this valuable presentation that you've put together.
Ian:Yeah, Mike.
Ian:And finally, I think that we could all do with remembering this link between estimates and metrics and performance management.
Ian:Even if you think you're a pure play ivory tower strategy consultant just looking for purity in the numbers, remember that every number later in the life of the business becomes a target or becomes a metric.
Ian:So understand that when they're used in that way, metrics have limitations.
Ian:And learn to help your client to set good metrics that will help drive performance without over relying on them and without picking up some of those gaming behaviors and some of those perverse incentives.
Ian:So, Mike, wrap it all up for us here.
Ian:Let's go back to our earlier idea of an ideal or perfect consultant.
Ian:What would be a perfect and ideal balance of skills around this idea of consulting and numbers?
Mike:You know, I think it's somebody who uses numbers with confidence but also knows how to put them in context, develops a broad skill set and an understanding of the pros and cons of different approaches.
Mike:Consultants can certainly build confidence for the clients while avoiding the pitfalls of being blindly focused on just the numbers.
Mike:So this ability to navigate between detailed analysis and big picture thinking a hallmark of a truly effective consultant.
Ian:So, Mike, let's not forget that on the Lumineers episode that's coming out alongside this one, we have all of that excellent interview with Ann about how do we get numbers somehow correct?
Ian:How do we approach our quantitative work?
Ian:And how has that kind of approach evolved over Ann's career?
Ian:She's going to talk to us about what we do when mistakes come along.
Ian:How do we avoid the mistakes in the first place, and how do we dig deeper into this pitfall of numbers being prone to manipulation?
Ian:We've got some great stories to tell there.
Mike:Nice.
Mike:And Ian, what do we have coming up next time?
Ian:Well, Mike, next time we'll be talking about the importance of networking in consulting.
Ian:Some of the myths that we need to bust, some of the ways that you can make your networking more effective.
Ian:I've just come back from running a panel discussion on networking at a pharmaceutical industry conference called espor, the International Society for Pharmaceutical Outcomes Research.
Ian:Sounds a lot more boring than it is in practice.
Ian:Rather than traveling all the way to a conference to learn how to network, you can get some of the skills and some of the conversation right here.
Ian:Now.
Ian:We hope that you've enjoyed spending time with us this episode.
Ian:We hope that you've enjoyed putting numbers together with the human side of consulting.
Mike:And we hope that you'll join us again next time on the Consulting for Humans.
Mike:Podcasting for Humans podcast is brought to you by P31 Consulting.
