Momentum Podcast: 573

Consulting Malpractice

by Alex Charfen

Episode Description

In this episode, we’re going to discuss consulting malpractice and just how damaging it can be. But before we dive in further, I want to forewarn you that this topic is a massive trigger for me. Far too many consultants give bad advice, experiment on successful organizations, have absolutely no track record, and really no business consulting entrepreneurs in the first place.   

I share a story in this episode that, unfortunately, isn’t uncommon. Consulting malpractice happens all the time, and it’s up to you to protect your business against it. Before even considering getting help from a consultant, make sure the service they provide is actually something your company needs, they know what they are doing, and you check their track record. Even after going through those filters, make certain that you have the time, effort, and energy to commit to the outcome you are working towards. Listen in as I share with you how to defend your business, so you don’t become a victim of consulting malpractice. 

Full Audio Transcript

This is the Momentum Podcast.

This is the Momentum podcast. I've been advising and helping entrepreneurs grow businesses for most of my career. I've been an entrepreneur growing my own businesses for most of my career. Today's podcast is about something that is so challenging to me as a lifelong consultant and supporter of entrepreneurs. It's what I call consulting malpractice. When a consultant is experimenting on a live body that is your business and they don't know what they're doing. Let me share a story with you that I think will teach you, show you what I'm talking about and help you avoid getting taken advantage of and possibly taking out a business by a bad consultant.

I'm Alex Charfen and this is the Momentum podcast. Made for empire builders, game changers, trailblazers, shot takers, record breakers, world makers and creators of all kinds, those among us who can't turn it off and don't know why anyone would want to. We challenge complacency, destroy apathy, and we are obsessed with creating momentum so we can roll over bureaucracy and make our greatest contribution. Sure we pay attention to their rules, but only so that we can bend them, break them, then rewrite them around our own will. We don't accept our destiny, we define it. We don't understand defeat because you only lose if you stop and we don't know how. While the rest of the world strives for average and clings desperately to the status quo, we are the minority, the few who are willing to hallucinate. There could be a better future and instead of just daydreaming of what could be, we endure the vulnerability and exposure it takes to make it real. We are the evolutionary hunters, clearly the most important people in the world because entrepreneurs are the only source of consistent, positive human evolution and we always will be.

I've been a professional coach and consultant for most of my career, and unfortunately I have a real massive challenge with a lot of coaches, consultants, advisors, people that work with entrepreneurs. And if you've listened to my podcast, you already know the many challenges I have. I think some of the worst advice givers to entrepreneurs are accountants and attorneys. You can go back and listen to my podcast, is about that. The advice that I hear them give is sometimes so horrible, I want to run in and stop them from talking. And the advice that other consultants sometimes give is absolutely atrocious and it drives me crazy.

But today I want to speak about something really specific, a type of consulting or coaching malpractice that is so egregious that it's one of those things that actually makes me angry. I get triggered from this. I get defensive for the entrepreneurs who are going through this, and it's when a coach or consultant has decided that they have a bright idea that is going to foundationally the way a company's run and then they decide to an experiment on a real organization.

Let me explain a situation that recently happened to me. I'm going to leave out any of the names and any of the business or I'm going to modify the business details slightly so that we don't know exactly who this person is, for obvious reasons, but let me share with you what happened to me recently at an event. So I went to an event a while ago. I was sitting in I think a breakout room or a break room, maybe we were at lunch, and a friend of mine who owns a $10 million plus business walked over to me with another woman that was with her. And with the three of us started talking and my friend said, "Hey Alex, I don't want you to know this is the person who's helping me with pay transparency in my company."

I got a heart palpitation. I actually felt uncomfortable. I felt threatened in the moment. I felt like I had a little bit of trouble breathing. And I said, "I'm sorry, what did you say?" And she said, "Oh, this is the attorney who's helping me with pay transparency."

I took a second, took a breath and I said, "All right." Well, I introduced myself to the woman and I started asking her questions. I said, "Why are you guys introducing pay transparency?" And here's what pay transparency is. Pay transparency is when you take an organization and you reveal to everyone what each other is making, salaries, bonuses, everything. So everyone in the business knows what everybody else makes. Now the, the arguments for this are things like the team will be more connected, it's a closer team, money is no longer an issue, you avoid discrimination. Here's what I can tell you about most of those except for potentially avoiding discrimination is that, this makes every time you hire someone, every time you promote someone, every time you change someone's pay, it becomes a conversation in your entire company about what's happening with who, and it raises the attention to pay so high that it gets incredibly complicated in an organization.

And here's what I can tell you from experience of watching existing companies go from no pay transparency to pay transparency, 90% of them have pulled it back and stopped, because it was so disruptive to the people involved that they realized it just wasn't worth it. I've watched this dozens of times over the course of my career. Existing business introduces pay transparency, everybody's told what each other is making, you know what immediately happens every time? A players leave. Your top producers leave. They don't like transparency, they want to win. They don't like everybody being on an even playing field. They want to feel like they have some type of an advantage. And I don't mean this an insulting way, but when you look at the organizations that have pay transparency, it's usually government organizations, organizations like the post office, organizations where there's longterm stability, organizations where there's not a lot of growth, organizations that do not tend to attract a lot of entrepreneurial thinkers.

I'm not saying there's anything wrong with the people that work in those organizations, in fact, the military has paid transparency and some of the most amazing beings I've ever met have come out of the military. But you have to understand you're setting your company up to have the same tactics in management as government organizations and the military. And it doesn't tend to attract really high producers in pay transparency. But here's the issue, the transition from no pay transparency to pay transparency can be so disruptive. It can take months. And like I said, in most companies I've ever seen, they've started the transition, usually rolled it out to leadership or to management, and then very quickly decided that it was not a good idea to give to everybody.

And pay transparency is right up there with the other really terrible ideas that consultants and accountants and attorneys come up with like, unlimited time off policies or eliminating titles so nobody knows who's who, or Holacracy, like Zappos, where everybody manages themselves. Here's the reason, there are very few companies that do any of these things because they don't work. And here's what happened at that event. So I'll take you back to the conversation. My friend has just introduced this attorney and said, "She's going to help me with pay transparency." And my first question was, why? And the attorney said, "Well, are you familiar with pay transparency?" I said, "Look, I'm completely familiar with pay transparency. Why are you doing it in this company?" And she said, "Well, there's so many different reasons, but the biggest one is it eliminates discrimination."

And I know the owner of the business very well. She's actually one of the most non-discriminatory people I've ever met. The mix of her staff is incredibly balanced. She has all different types of people on her team. I've never ever thought of her business as having discrimination. So I said, "Do you feel like there's a discrimination problem in this company?" She said, "No, no, no, not at all. But we wanted to put pay transparency in any way." So I said, "So are you solving a problem that doesn't exist yet?" And she goes, "Well, we're going to stop a problem from starting."

As soon as she said that, I started getting even more uncomfortable and I said, "I want to make sure, what you're saying is you're going to take this organization from not having transparency to having transparency to everybody?" She said, "Yes. I said, "Okay, well then I have one question for you. How many times in your career as an attorney or consultant or advisor or whatever your position is here, have you taken a company from not having paid transparency to having pay transparency?" And she looked at me and said, "This will be my first time."

The heart palpitation that I had in my chest turned to anger and frustration and irritation. And I immediately said to her, and this may not have been the most polite thing to say, but it was the most transparent and real thing I could think of saying. I immediately said, "If you've never done this, you should stop talking about it. You're a liability." And I said, "This is malpractice. You have no idea what's going to happen to this organization by introducing pay transparency. And if you've never done this, if you've never seen it, if you've never been through it, then you're a fraud. Why are you saying you can help somebody with this if you've never done it before? You should stop talking about this. And with all due respect, if you haven't seen the destruction that this causes in organizations, you shouldn't be going around selling it as a service."

And the attorney I was talking to was clearly taken aback and she said, "Well, how would you suggest companies install pay transparency other than doing it this way?" And I said, "Well first, I wouldn't suggest you experiment on live bodies. We're talking about a $10 million plus corporation that you have no idea how much frustration and irritation and anxiety you've introduced by doing this right now. Not only that, I know the company that she's doing this and it's already in a massive leadership transition and creating massive behavioral change. So at a time of leadership transition and behavioral change, to introduce something as as invasive and pervasive as pay transparency, makes absolutely no sense. But you know what? An attorney who's never done it before and isn't a consultant and doesn't understand organizational change, and is caught up in the legalities of stuff, doesn't have any clue what they are imposing on a company to say, let's go ahead and slap in pay transparency."

And so when I told her very clearly, I said, "You're an attorney, but I want you to know something, this is malpractice. You don't know what you're doing. You don't have a process. This isn't clear, and you're operating on a live body for the first time." And when she said, "Well, how would you suggest we put pay transparency in organization?" Here was my answer," I don't know and I don't care." I have never run into an organization in my career where I said the next logical best step for this company to grow and scale is to install pay transparency and let everybody know what each other's making. Here's what I've found every single time I've reviewed any company I've ever been involved with, there is always a priority higher than doing something as invasive and confusing and pervasive as pay transparency because pay, what people are paid, what each other is paid is one of the most emotional things in a business. And as an entrepreneur, unless you want to commit a considerable part of your time to managing those emotions, to having team meetings with team members, to explaining to them how to accept pay transparency, then you shouldn't do it.

And I said, "I want to know the process..." To the same consultant, I said, "I want to know the process of elimination and prioritization you went through where you decided the most important thing for this business right now is paid transparency. I don't think you did it. I think you decided that this is the most important thing right now because you wanted to do it to see if you could pull it off and then go out and sell it to other people. I'm sorry, but I feel like that's malpractice and you're completely irresponsible."

Now, that's not the best way to win friends and influence people, but I'm sorry. I'm at the point where consultants and coaches and attorneys and accountants who give bad advice, who experiment on companies that are running, who don't really know what they're doing, who don't enter into something with a process, who try to get an outcome without understanding what all of the consequences are, I'm at the point where I just don't have any patience. Anymore. My frustration level of watching businesses go through these crazy experiments and fall apart is through the roof. And it's not just pay transparency, whenever I watch a CEO try to eliminate everybody's titles. Robin Sharma is an incredible author. I love the guy. But the leader with no title just doesn't make sense in a real company. It's a nice allegory. It's a nice story. It's not real. You have to have titles. Titles are a roadmap in a company.

One of the other big dumb ideas to come out like unlimited time off. Unlimited time off is for companies like Google and Apple and Facebook where they have so many systems in place that they give people unlimited time off but nobody takes it because they work at Google, Apple or Facebook, you don't need to have it. And when it comes to something like pay transparency, again, I've never met a small business in my entire career and when I say small all the way up to tens of millions, that pay transparency was the next logical big thing. In fact, it's quite the opposite.

When you look at your business and you evaluate over and over again where you should focus based on the five core functions of lead generation, lead nurture, conversion, delivery, retention, resell and upsell, here's what will happen, you will defend yourself against terrible consultants like the one I'm talking about. This attorney shouldn't be working with entrepreneurs. She should go do something else, because if she didn't have the understanding of how dramatic a change this was going to be in this company, she never should've made the proposal. And here's what I can tell you as an entrepreneur will defend you and protect you against bad advice, if you consistently drive what you're going to do next based on the five core functions. When you evaluate your lead generation, your lead nurture, your ability to convert a customer, your delivery, and then your retention, resell and upsell, you will always be focused on the customer journey and what is going to move your company forward the fastest.

Here's what I can tell you. By evaluating your five core functions, lead gen, nurture, conversion, delivery, retention, resell and upsell, you would never reach the week where you said we need to focus on pay transparency. It would never happen. So defend your business, especially from consultants that don't know what you're doing.

Here's some advice, if you're going to enter into a major initiative with a consultant, number one, make sure it's something that your company actually needs. Ask yourself is pay transparency going to be the biggest thing that moves our business forward this quarter? I can tell you for 100% of the businesses I've ever worked with, the answer would be no. Number two, make sure the consultant knows what they're doing. Do they have a track record? Is this something they've done before? Ask the magic question. How many times have you taken a company from not having this to having this and can I talk to some of your successful clients? If the answer is zero, you have to consider, do I want to be the first? Do I want to be the guinea pig? Do I want to be the first person to go through this process with an inexperienced consultant who can't anticipate what's going to happen next and doesn't really know what they're doing? I'm sorry, but that's the reality. Ask the question.

And then third, make certain that this is something you have the time, the energy, the effort to commit to. Committing to something like pay transparency without understanding just how much time and energy and effort that's going to take is crazy. But that's exactly what happened to my friend. Their business is in a massive time of change and instead of having a consultant, they said, "Hey, let's talk about what else you have going on right now and see if this is the right thing to do." They had a consultant that was so focused on getting the outcome, getting the pay transparency, actually providing the services they got paid for because she doesn't get paid to just see if the business is going, well, she gets paid to install this thing called pay transferring she had never done before.

And so if you're going to enter into an agreement with a consultant, make sure they've done it before. Get a track record, make sure it's something you need and you're clear on the process, or you may suffer through consulting malpractice as well. My fingers are tightly crossed that my friend's business survives, and this doesn't dramatically affect profitability this year. But in my experience from watching this in the past, anytime a company between 10 and 30 million has tried to install pay transparency, there's team turnover, massive confusion, tons of anxiety, and it just isn't worth it.

Don't be a victim of consulting malpractice. Work with a consultant that knows what they're doing, that gets a consistent result with the same type of client over and over again. That's what we do. If you're ready to grow and scale your business, if you want to be able to answer the question, what should I do next to grow my business as fast as possible? And if you want to be part of a community of CEOs that are taking their businesses and turning them into real organizations so that they can build empires, go to and fill out a short application for my team, jump on a call with Jeremy and let him show you what we can do for you.

Don't be a victim of consulting malpractice, instead put the right processes and systems in place so that you can grow and scale today.

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With gratitude,


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