Insider or Outsider? The Challenges of In-house Consultants in Organizational Change

Table of Contents

1. Introduction

2. In-house Consulting
2.1 Definition
2.2 In-house Consultants as Change Agents

3. Benefits and Challenges of In-house Consultants

4. Implications for Managing Change

5. Conclusion

References

1. Introduction

In today’s fast-paced and dynamic business environments, organizations are increasingly experiencing different types of challenges and transformations. They must continuously adapt to changing conditions to remain innovative and competitive. To manage these changes, organizations hire consultants to guide and facilitate the change process and implementation. These can be both external and internal to the company (Schumacher & Scherzinger, 2016). Consultants from outside the company are hired to provide new expertise, additional resources, and insights into industry best practices (Barthélemy, 2017). However, a growing number of companies such as Cisco, Samsung, and Volkswagen are establishing their own in-house consulting teams to manage internal change activities and solve business problems (Bernholz & Teng, 2015; Sturdy et al., 2016). In-house consultants are permanently employed by the company, whereas their external counterparts work for the company for only a limited time (Wright, 2009). Therefore, both forms of consulting must be addressed individually (Schumacher & Scherzinger, 2016). Despite its growing popularity, academic research and literature on in-house consulting as opposed to external consulting are still limited (Grima & Trépo, 2011). Thus, I focus on in-house consulting in this paper.

According to Schumacher and Scherzinger (2016), in-house consultants face different circumstances and expectations than external consultants due to their corporate affiliation. These conditions include, for instance, organizational structures, cultures, and management processes (Ejeñas & Werr, 2011). They experience complexity and ambiguity in their organizational membership, identification, and the environment in which they operate. This creates several challenges in their work as change agents (Wright, 2009). Consequently, it is critical to understand what these challenges are and how in-house consultants can address them to successfully lead and implement change in organizations. In this paper, I investigate the role of in-house consultants as change agents and their challenges in the change process. From this, I derive implications for in-house consultants on how they can effectively manage change in organizations. The focus of this paper is on managing change (Session 4) and consultancies and consultants (Session 10).

Firstly, I define in-house consulting and examine the different organizational roles and functions of in-house consultants. In doing so, I focus on their role as change agents. Secondly, I discuss the benefits and challenges of in-house consultants in the change process. Finally, I present evidence-based implications for in-house consultants on how to successfully manage change in organizations.

2. In-house Consulting

In the following section, I introduce the concept of in-house consulting by defining it and explaining its characteristics and functions in organizations. Furthermore, I elaborate on the role of in-house consultants as change agents.

2.1 Definition

In recent years, the concept of in-house consulting has gained popularity in organizations (Grima & Trépo, 2011). It can be defined based on multiple characteristics. Wright (2009) describes in-house consultants as specialized employees or managers that take on a consulting role. Similarly, Holmemo et al. (2018) note that in-house consulting units consist of internal experts from various fields, such as organizational development, marketing, or finance. They are usually in human resources or line management before assuming the consulting role (Barnes & Scott, 2012). Accordingly, in-house consultants are members of the organization (Grima & Trépo, 2011; Wright, 2009). Although they are permanently employed by the company, they operate outside the company’s hierarchical structures and traditional activities. Within these structures, they are organizationally independent (Holmemo et al., 2018). The purpose of internal consulting is to incorporate external managerial expertise into the organization. In doing so, in-house consultants take on a management support function and, to some extent, also temporary leadership responsibilities (Holmemo et al., 2018). The primary objective is to increase the productivity of the company’s business divisions (Ejeñas & Werr, 2011).

Previous research has examined the various types and roles of in-house consultants in organizations. In their study, Holmemo et al. (2018) suggest two types of in-house consultants: Advisor and navigator. According to the authors, advisors are employees who work at a strategic level and usually have prior experience in the company. They have often worked in similar organizations or as external consultants in the past. Navigators are employees from lower hierarchical levels who possess substantial knowledge and expertise in specific fields and business procedures. In contrast to advisors, navigators are primarily recruited internally (Holmemo et al., 2018). Depending on the type of in-house consultant, they can take on different roles in managing the advisory process. Sturdy and Wright (2011) investigate how in-house consultants interact with external consultants and identify three different roles. First, in-house consultants can be seen as the organizational gatekeeper who monitor the selection and use of external consultants in the consulting process. Second, in-house consultants can act as mediators between external consultants and internal clients, for instance, by establishing governance mechanisms for their interaction. Third, in-house consultants can be partners with external consultants by sharing knowledge and ensuring a common understanding of organizational culture and policies (Sturdy & Wright, 2011).

2.2 In-house Consultants as Change Agents

Among the various roles, that of a change agent is a key function that in-house consultants assume in organizations (Wright, 2009). Change agents support or initiate change processes, including the introduction of new practices and the transformation of existing patterns and systems (Weick & Quinn, 1999). They aim to convince other members of the organization to embrace change through communication, coordination, and commitment (Battilana & Casciaro, 2012). As change agents, in-house consultants facilitate and advise on changes initiated by the client (Schumacher & Scherzinger, 2016). Clients are managers or business units of the company (Wright, 2009). During the change process, in-house consultants identify challenges and opportunities, develop proposals and recommendations for the management, and support their implementation (Holmemo et al., 2018; Wright, 2009). Usually, in-house consulting for change activities is linked to change initiatives in the organization. This implies that in-house consultants as change agents take project-based consulting approaches (Wright, 2009).

3. Benefits and Challenges of In-house Consultants

“Internal management consultancy has traditionally been seen as the ‘poor cousin’ of its external counterpart ...” (Sturdy & Wylie, 2011, p. 4). Drawing on this statement, Sturdy and Wylie (2011) highlight the traditional view of external consulting as superior to in-house consulting. However, empirical research has challenged this negative perception by investigating the organizational benefits of working with in-house consulting teams (Schumacher & Scherzinger, 2016; Sturdy et al., 2015).

As members of the organization, in-house consultants possess in-depth knowledge of the organization (Grima & Trépo, 2011). Therefore, they can develop more unique ideas and solutions than external consultants (Barthélemy, 2017). They also understand the culture, language, and meaning system shared within the organization. This helps them communicate the importance of the change to other employees and thus improve their attitude towards it (Stouten et al., 2018). Due to their organizational membership, in-house consultants can establish local networks within the company, enabling them to leverage formal and informal sources of power to legitimize the change (Sturdy et al., 2015). Furthermore, the relationship between the change initiator and recipient influences the recipient’s readiness for change (Stouten et al., 2018). In contrast to external consultants, in-house consultants can build strong relationships with other organizational members because they are permanently present in the organization. Thus, they can draw on personal relations to drive change (Schumacher & Scherzinger, 2016). High-quality relationships also help consultants overcome employees’ resistance to change initiatives (Ford et al., 2008). Moreover, Grima and Trépo (2011) point out that working with in-house consulting teams is less costly than hiring external consultancies. According to Schumacher and Scherzinger (2016), in-house consulting develops organizational change capacity. Change capacity is an organization’s overall ability to plan, manage, and implement changes (Meyer & Stensaker, 2006). This is a source of competitive advantage for organizations (Schumacher & Scherzinger, 2016). Taken together, the benefits of in-house consulting are firm-specific expertise, informal networks, and building organizational change capacity.

Nevertheless, in-house consultants face multiple challenges in organizations (Schumacher & Scherzinger, 2016). In-house consultants are often positioned at the middle hierarchical level and report to the HR function rather than to the management. Due to their structural positions, there is a risk that they will not be taken seriously by top management (Schumacher & Scherzinger, 2016). Furthermore, Wright (2009) notes that in-house consultants are permanent employees of the organization who work to some extent outside its conventional and hierarchal structures. Therefore, they operate in an ambivalent and bounded environment. This increases the complexity and ambiguity in their organizational membership and identification. Due to this ambivalence, in-house consultants encounter organizational boundaries and conflicting role expectations (Wright, 2009). In response to the need to be both different and embedded within the organization, in-house consultants develop dual identities: as insiders and outsiders. As this two-sided identity is inherently contradictory, in-house consultants may experience uncertainty, conflicts, and confusion (Sturdy et al., 2015).

The firm-specific nature of the consultants’ knowledge is both a benefit and a challenge (Barthélemy, 2017). The internally generated knowledge is more unique but lacks validation as it has not been applied multiple times in different scenarios. In contrast, external consultants offer best practices that have already been tested and proven successful (Barthélemy, 2017). An empirical study reveals that best practices outperform internal knowledge in terms of firm performance (Drnevich & Kriauciunas, 2011). In the same vein, Gassam and Salter (2020) note that in-house consultants are less experienced than their external counterparts. While in-house consultants work in the same company for a longer period, external consultants deal with different companies, industries, and change processes. Thus, they develop a wide range of skills and knowledge, enabling them to draw on extensive experience with various organizational change activities and strategies (Gassam & Salter, 2020).

Moreover, conflicts in the client-consultant relationship arise due to the in-house consultant’s involvement in the organization. Clients are the consultants’ colleagues, making it challenging for the consultants to maintain the necessary independent perspective. It can also cause clients to doubt their ability to make objective judgments (Schumacher & Scherzinger, 2016). This can lead to resistance from employees to proposed change initiatives or activities (Ford et al., 2008). Similarly, in-house consultants may resist change as they are also part of the organization. If the change does not align with their interests as an employee, this can jeopardize their neutral position and cause them to resist (Ford et al., 2008). In addition, Gassam and Salter (2020) suggest that it is difficult for consultants to question established practices and address problems adequately once they have built relationships within the organization. Their familiarity with the organizations creates social boundaries, which inhibit them from raising issues and taking action (Gassam & Salter, 2020). This phenomenon can be explained by social identity theory. According to social identity theory, members of an organization become a social group to which they feel connected. The theory argues that individuals desire to belong to the group, which pressures them to conform to group norms and values. Deviations from these can result in the individual being excluded from the group. By challenging existing standards and driving change, in-house consultants differ from other organizational members. Consequently, they may be reluctant to do so to protect their relationships with colleagues (Hogg, 2020). In summary, challenges for in-house consultants arise from their structural position, their ambiguous dual identity, their lack of external experience, and their relationships with clients.

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