Recruiting in a down-turn: how to grow your consulting team and business, despite the weakening economy
The next year will present a major challenge for how consultancy firms manage their people and adapt to the new environment. We have suggested four key areas that firms need to think about if they are going to benefit from the opportunities and minimise the risks of the recession.
How to grow and develop your consulting team during the down-turn:
1) Leading your people
The vast majority of management consultants will not have worked during the last general recession of 17 years ago, most of them will have been at school or university. Like in other industries, they may feel fearful about their jobs and need reassurance, as well as good motivation to perform at their best. Continued investment in consultants’ training and development as well as maintaining consultants’ bonus payments will pay dividends in performance during the down-turn and in retention when the economy improves.
2) Capacity building
In the short term, consulting firms need to think about whether they need additional skills to adjust to changing client demand - for example by enhancing their operational consulting or cost reduction capability. They will need to change the ideal target profile to reflect this. They may also want to improve their own development capability - in a more challenging business environment, they may need to hire seasoned business developers in order to grow or sustain business levels.
Longer term, the market for consultancy services is highly cyclical and is therefore likely to return to growth in 2010. Fiona Czerniawska of Arkimedia comments “looking back over the last 20 years, I think that the consulting industry works on five year cycles: three years or so of relatively high growth, followed by two years of lower growth”. Firms which can sustain lower utilisation and profitability through 2009, but retain consultants or build capacity through hiring will benefit once growth recovers.
The recession is a great and rare opportunity to build capacity cost-effectively due to the increased availability of good consultants. Whilst during normal times consulting firms often exit under-performing individuals through an up-or-out approach, the quality of the talent being released to the market during the downturn is often very good or exceptional, as firms often cut indiscriminately when restructuring areas of their business. The “switch premium” or increased offer that firms need to offer, to lure consultants away from their existing employer is also lower due to less competing offers. Faced with potential redundancy and dwindling promotion opportunities, consultants are also more flexible and pragmatic in terms of their career aspirations. For example, we have seen good strategy consultants becoming interested in operational consulting work. These operational consulting firms have been able to tap the analytical skills of consultants who, under “normal” circumstances wouldn’t have considered working in non-strategy firms.
There is also an excellent opportunity to acquire superb talent from outside consulting. Within financial services and industry larger scale cuts are taking effect there and career opportunities becoming scarcer. At least one of the Big 4 is actively exploiting the softness in the recruitment market as part of their general strategy to build scale over the next two years.
3) Effective resource management
Maintaining high consultant utilisation levels will be one of the key challenges over the next year. Firms which have multiple service lines including existing operational and cost reduction consulting should plan in terms of who they can transfer from their growth and strategy areas. Firms which have international offices could also consider relocating consultants from the
Developing and utilising a pool of contractors will provide a useful variable component to the resource mix for consulting firms, as they are paid on an as-needed basis. They also can offer flexibility in terms of hiring the contractors permanently once the market improves. Contractors can also provide specialist skills which are either in high demand during the down-turn. Firms will need to think about how they develop their contractor consultant network and may want to partner with a specialist recruitment firm to assist in the search and engagement process. When we founded Mindbench in 2003, contractor support for consulting firms was the first area of resource management that we addressed. At the time, clients had made significant redundancies and were looking to deliver projects effectively without significantly increasing their fixed costs. At the same time a significant number of good consultants wanted more work flexibility. We built a network of the best contractors who had excellent consulting pedigrees and engaged this talent on a project basis with our consulting firm clients.
4) Minimising the impact of redundancies
Inevitably some consulting firms will need to consider making redundancies if their business volumes shrink. Firms should look at potential scenarios for the next year and create contingency plans of what they would do if their business volumes fall of by 10, 20, or 30%.
They need to limit the potential damage to their future capacity in the firm. They should think first about whether people can be usefully redeployed into other areas of the firm, and also what the scenarios could be in terms of the market cycle - and if they can afford to wait until the market improves. Firms could consider offering paid or unpaid sabbaticals to consultants whose skills could be useful later in the cycle, and deferring start dates for new graduates. Some clients including some Big 4 consultancies are also using the down-turn as an opportunity to rigorously apply the performance review and management process and exit under performers from the business. This is preferable to the redundancy process since it allows these firms to upgrade their quality without losing significant capacity.
Where redundancy is applied, the process used should be based on clear, predefined performance metrics together with skill requirements for the current and future business, rather than first-in-first out (which could suggest age discrimination) or whether the consultant is well liked by their manager. Voluntary redundancy with financial incentives might be preferable to compulsory as it could help to ensure a better morale amongst remaining staff as well as maintaining bridges with the consultants who have been let go. With voluntary redundancy the firm will need to plan in terms of messaging this to the right audiences so that they do not lose consultants that they want to retain.
When making redundancies, the consulting firm should consider both financial assistance in the redundancy package and offering assistance to the consultant in terms of career opportunities. Through their client network, it is likely that they will have extensive contacts with organisations who could be interested in hiring the consultants permanently. They could also consider working with specialist recruitment companies such as Mindbench to locate the right opportunities and offer outplacement services. The benefits of providing such assistance are potentially vast. It is well known that some consulting firms including some of the leading strategy firms perform a significant share of their business with alumni of their firm. Offering assistance to people who are leaving, as well as regularly maintaining contact with their alumni through alumni networks will help consultancies re-hire as required as well as sell more work via referral.
Firms which plan ahead and think about the long-term as well as their short-term recruitment and resourcing goals are the ones which will benefit most from the current market uncertainty. Mindbench is holding a special recruitment Masterclass in January, addressing the people issues associated with the recession for consultancy firms. If you find this article interesting and would like a more in-depth exploration of the challenges ahead and how consultancy firms are addressing them, please register your interest.
'How to emerge fitter, leaner, stronger!' HR and Resourcing in the downturn- an MCA Masterclass 28th January
For a more in-depth understanding of how to benefit in the current market and to hear about best practice in recruitment from Big 4 Partners and Directors from the leading consulting firms you should reserve the 28th January in your diary.
This event is aimed at senior managers and HR professionals with responsibility for recruitment strategies in consulting firms over the next two years, as well as all those involved with the resourcing and management of individual projects. For further details contact Danielle at danielle@mindbench.co.uk
For information on specialist recruitment services and consulting jobs go to www.mindbench.com