Consulting is pervasive in many industries. Yet the use of consultants remains controversial. Why would firms give away key activities to hired guns? Why would these “mercenaries” perform these activities better than in-house employees? Many employees dismiss consultants as people who “borrow your watch to tell you the time” — and then charge you for the privilege.
Does It Pay to Hire Consultants? Evidence from the Bordeaux Wine Industry
Consulting is pervasive in many industries, yet the use of consultants remains controversial. Why would firms give away key activities to hired guns? Why would these “mercenaries” perform these activities better than in-house employees? To evaluate the impact of hiring consultants and figure out when they might offer the most value, one study examined the Bordeaux wine industry, where over two-thirds of wineries hire consultants to improve the quality of their wines. Looking at 311 wineries over a ten-year period, the study found that consultants improved wine quality at all wineries they worked with, but the ones that benefited the most were those who had the worst resources — e.g., the lowest-quality terroir. The firms most likely to hire consultants, however, were those who had good terroir (and thus could afford to pay consultants). The wineries that produced truly outstanding wines were the least likely to use consultants.