Our latest contest for the presidency of Schmidlap National Bank was for the best advice on the benefits and dangers of using consultants.

Some responses were truly laudable. Others were sales pitches from consultants hoping for a free plug more than a chance at the distinguished award we offer. And, naturally, some were strong warnings about the cost and value of consultants.

My favorite came from Robert J. MacDonald, an internal consultant for Natwest's U.S. operation - now Fleet - who is involved in purchases and sales of banks, business unit valuations, and downsizings.

His summation: "Both Natwest and Fleet used major, well-known consultants. They are expensive and, for the most part, do a very good job of telling you what you already know. For the right price, they will even tell you what you want to hear."

I am afraid a lot of respondents gave a similar warning in keeping with the old saw: "A consultant borrows your watch and tells you what time it is, then puts the watch in his own pocket."

Some respondents were kinder.

Margaret Irvine, vice president of quality customer service at Citizens National Bank of Evans City, Pa., sent in a letter raving about International Consulting Inc. of Fairfax, Va. She said their help in choosing imaging software and hardware not only saved money but included a seminar on how to deal with vendors to keep costs down. Her conclusion about the watch analogy was that ICI taught Citizens to fix its watches "so they never need to be wound again."

Robert E. Kafafian, executive vice president of Hopper Soliday & Co. of Lancaster, Pa., extolled his firm's services but did give a warning:

"I realize that there are many horror stories associated with consultants. However, I believe that it is important for community banks to establish relationships with a small number of consultants that they can turn to and depend on."

There were also several warnings about fly-by-night consultants who provide fancy reports and bullet-point documents but are gone during implementation - and long gone when blame for a failed job is passed out.

It is because of this hazard that we have awarded our Schmidlap presidency to Randall L. Austin, president and chief executive of Bank of Oldham County in La Grange, Ky.

Mr. Austin reports:

"I am president and CEO of a new bank in a county dominated by larger, out-of-area holding companies. We opened our bank in September 1993 and have been very pleased with our success to date.

"While we have a super board and management team, a great deal of credit for our success goes to the advice we received from our consulting firm (Professional Bank Services Inc., Louisville) when we were forming the bank. Their continued support and services have also been invaluable.

"We have outsourced our compliance review, our internal audit function, and portions of our strategic planning process to the same firm and have been pleased with the results."

Mr. Austin won his award especially for his solid advice on what to do before selecting a consulting firm:

*Be clear about what you want to gain from hiring a consultant, and select one whose abilities match your objectives. (Some firms, especially the global ones, claim to be experts in everything but are not.)

*Be sure to check their credentials and references.

Once the choice is made, the Kentucky banker says, be sure to:

*Monitor to ensure communication between consultants and staff and to make sure the job is on course.

*Follow up on consultants' recommendations after they're gone. Develop a definitive action plan in concert with the consulting firm to ensure that recommendations are implemented and goals achieved.

Mr. Nadler is a contributing editor of American Banker and professor of finance at Rutgers University Graduate School of Management.

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