In June 2005 Mindbench conducted a study of 21 consulting firms, including boutiques, strategy houses and large generalist consultancy companies to analyse how they are currently meeting these challenges and how they could adapt to adopt a more efficient approach to secure their position in this increasingly competitive market. Flexible staffing, in the form of Associates could provide the answer.

Challenges to the consulting pipeline

1. Increased staff utilisation
Over the last year, staff utilisation amongst consulting firms has shown a marked increase, jumping from an average at 65% in the second half of 2004 to 75% at the start of the same period in 2005. With strong sales growth projected for the short-medium term many consulting companies are looking for an annual growth of 10-15%, with some looking to grow as much as 30%+. In view of the current high utilisation rates, consulting companies will need to hire aggressively in order to meet these growth expectations.

2. Volatility in consulting demand
The level of M&A provides a good overall indication of firms’ desire to grow which feeds through into traditional management consultancy business, as companies spend on business strategy and due-diligence, and increase marketing consultancy. The European M&A market stood at $1 trillion in 2000, halving in 2001 to 2003 and then recovering dramatically to $1 trillion this year. Consulting companies focussing on outsourcing, cost reduction or government work have boomed during the 3 year downturn. These areas have counter-cyclical qualities as companies seek to reduce costs and government spending counter-acts a corporate slowdown. In contrast, firms focusing on business strategy have been seriously weakened by the downward part of the cycle, with some firms off-loading half or more of their consulting staff after 2000. With the cycle turning up from 2004, these firms have been re-hiring aggressively to try to meet the surge as companies focus on growing top-line. This process is disruptive and expensive: having lost some of their best talent and having destroyed goodwill, firms then need to invest in recruitment to rebuild.

With such volatility in the demand for consulting, firms need to adopt an intelligent approach to managing their pipeline, an approach which seeks to balance consulting demand and supply of consulting talent. Effective associate staffing could be integral to this approach, enabling firms to have the flexibility to meet demand surges and remain lean during droughts without off-loading core staff.

3. High staff turnover
High levels of staff turnover, traditionally associated with sectors such as retail (42%), present a further challenge to managing the consultancy pipeline. UK consultancy staff turnover levels rank comparably high, at an annual rate of 20%. To put it into perspective, this is 2% higher than the staff turnover at UK private sector call centres - described as having “crisis” levels of staff turnover - and is also higher than both the European and US averages. High staff turnover is a major problem for consulting companies in any business environment although an even more serious problem for consultancy companies looking to grow their business. Associate staffing, by offering a flexible resource, could provide the solution to this problem.

4. Demand for experienced specialists
Another potential problem for consulting companies is the demand for experienced specialists due to an increased sophistication amongst the purchasers of consultancy services. This demand has resulted in a wave of new consultancy companies in recent years, focussing on particular sectors such as Troika (financial services) or