The following article is part of the serialisation of more than 100 pages of career editorial from The Definitive Guide to UK Consulting Firms. Professionals seriously considering the option of furthering their career in consulting may download the full guide.
Expected hiring patterns in the UK consulting market
UK recruitment patterns within the consulting industry have been on a roller-coaster ride over the last few years. As James Tetherton, Managing Director from Kaiser Associates, said: ‘Consultancy will always grow with the boom and shrink with the recession, yet even though the economic recovery is shaky, we are still seeing very strong and sustained consulting demand.’
As discussed in the first edition of this guide, hiring crashed at the start of the 2000s, before experiencing a period of sustained growth and buoyancy from late 2004 until late 2007. When the first edition of this book was produced in the first part of 2008, the full impact of the credit crunch and ensuing global financial crisis was yet to be seen. Hiring slowed in 2008, before falling substantially through to the end of 2008, flat-lining through 2009 and slowly recovering in 2010. I am pleased to say that hiring has grown significantly through 2011.
The first edition went to print weeks before Lehman brothers collapsed. Accenture offered voluntary redundancy to the majority of their analysts, KPMG went to a 4-day week. E&Y; had a full clamp down on hiring, and across the industry projects were dropped. Today, some firms are still being forced to make redundancies as they battle to secure projects. However, in other areas, consultancy firms are growing rapidly.
The three drivers of hiring activity: growth, utilisation and staff attrition
In order to make any insightful comment on the next few years, we need to look at what drives hiring in a consulting firm.
Firstly we have the market growth rate in consulting; that’s to say how much consulting industry revenues are expected to grow year-on-year. During the recent recession, MCA statistics saw the consulting industry in the UK contract by 12%. In the last year or so we have seen the industry grow again, but only at the modest level of 2%. Fee rates have contracted by 1% over the same time period. This means, that in order for the industry to remain static, and indeed to grow by that total of 2%, the number of billable days performed by consultants must increase by 3%. Therefore, in terms of current headcount, consultancy firms need to grow by 3% to meet market demand.
The second consideration is the staff utilisation rate that is being achieved in the industry. Utilisation is the percentage of a consult ant’s working days where time is actually being charged out to clients. Utilisation cannot be sustained anywhere near 100% because all consultants need time for non-billable activities like training, interviewing of new hires, working on proposals to win new business and taking holidays. Following the modest market expansion we have seen over the last 12 months, utilisation rates are back up to target levels. This means that new projects cannot be staffed from ‘the bench’ and hiring needs to take place. Indeed, a number of clients have come to us asking us to provide contractors for them to staff projects that they have won, and haven’t been able to staff themselves.
The third factor is staff attrition; the number of consultants that are going to leave the firm in the next year and therefore need to be replaced. This is essentially the amount of hiring that needs to be undertaken just for the firm to stand still. During the last 3 years the majority of attrition has been driven by the consulting firm’s need to remain solvent. Many consultants left the industry and those that stayed with their firm were not looking for a move within consulting because they realised how uncertain the market was. However after years of pay freezes, many consultants have now become frustrated with their position with firms not yet well placed to offer widespread pay rises. However, many firms have been offering higher packages to new joiners. This has precipitated a rapid increase in attrition that is being seen across the market. The 2011 Top-Consultant.com Recruitment Channel Report, sponsored by Huntswood, predicted a rise in attrition rates to 20%. This means that in the next year, up to 1I5 of consulting firm staff are expected to move on and, therefore, need to be replaced simply in order for firms to maintain headcount.
These three factors together, give us a figure of 23% headcount growth required by consulting firms in order to realise the potential market growth (3% rise in billable days,0% bench capacity and 20% to cover attrition). Moreover, nearly 75% of consultancy recruiters reported in January 2011 that they expected to make more hires than last year.
‘This statistic explains why recruitment agencies have experienced a rapid change in fortunes in the last months, particularly when set against the backdrop of a sector that has shed 7/3 of its pool of recruiters during the downturn. It also explains why job board advertising volumes have been picking up consistently during recent months,’ said Tony Restell at the publication of the 2011 Recruitment Channel Report. This is good news for hiring across the consulting industry.
However, this pattern does have variation within it.
Differences in expectation by project type
It must be highlighted that this broad positivity is not evenly spread across the industry. Financial Services, traditionally the biggest spender on consultancy, had its recession through 2008-10. Today it is growing very rapidly, and consultancy recruitment in this sector is significant. This is contrasted by the public sector, which is traditionally the second largest sector. We are in the midst of the public sector recession; consultancy, and consequently hiring, has dropped off significantly here. The acquisition of Tribal Government and Tribal Health by Capita is a reflection of the uncertainty in this market.
However, some firms do not have the same pessimistic attitude to the public sector market. Applied Acumen has not seen a total drop off, and Hudson & Yorke are optimistic. ‘We see lots of opportunity in the public sector. There are three reasons for this. There is an expressed desire from public sector organisations to engage with specialist consultancy firms. Hudson & Yorke, and other specialist firms, have not been associated with the problematic IT programmes referred to in the public domain (e.g. NPfiT). Also, the Hudson & Yorke networks proposition is highly topical,’ said Harry McDermott, Hudson & Yorke CEO. These are examples of some green shoots appearing in public sector consulting.
Similarily, the expensive strategic ‘nice-to-have’ pieces of work are not being commissioned by Chief Executives in the same prolific way that they once were. As James Platt, Partner responsible for recruiting at The Boston Consulting Group, summarised: ‘Overall the market may go up and down but what we do (premium strategy) is a quality-driven market, if you have the right people, and then train and develop them, business will grow and demand will always be there.’
The must-have IT projects are still there, such as regulatory reporting in financial services. However, the key area of growth is for practice leaders that can restructure a consulting practice, bring in new services and ideas, and win business. There is an ongoing tussle to attract and retain these senior consulting professionals with a proven track record of selling new consulting business, and this will only intensify over the next 18 months.
Across consumer goods and manufacturing, in all its forms, consultants that can optimise supply chains are highly in demand, as they can show their worth very clearly by the amount of money they save off the bottom line cost of production. In these times of austerity, any consultancy and therefore consultant, that can directly prove their worth through efficiency, increased production or cost reduction is going to be highly sought after. Avisen offer a niche business information and consumer analysis solution that has held up through the recession. ‘If you are direct about offering and you have the right people that can deliver, then there is a strong market,’ said Jon Hill, COO at Avisen. ‘There is also a big call for cost transparency- we have a strong offering here too; our market is growing!’
Finally, Financial Services regulatory consulting is on the up. In the wake of the global financial crisis, new FSA regulations are being brought in across the market. Many financial institutions are turning to consultants to help them understand what the impact of these regulations is going to be, and what they need to do. Similarly in life sciences, regulation is coming into force in bio-tech and more generic pharmaceutical products. WCI Consulting’s market footprint is growing as the influence of the regulator grows. ‘Our business succeeds because we are able to bring specialist insight of the life science regulatory environment to our clients. As the regulations change, we need to keep a step ahead so that every conversation we have with our clients brings insight and adds value,’ said Jim Tizzard, WCI Consulting, CEO.
Key trends in hiring methodology
Time to hire
The time to hire is still lengthy in consultancy. However this high lights a key trend in consultancy recruitment – time to hire and lengths of process are slowly dropping. As the war for talent has intensified, many of the larger consultancy firms have gone to two stage processes (filter interview followed by assessment centre) as they understand the real war for talent that now exists and they know that they have to be the ones that win that war if they are to survive.
War for talent
The number one challenge and trend that we see in the consultancy recruitment market, and that all of our contributors have seen, is a war for talent. Justin Ockenden, Managing Director at Satori, believes ‘with big firms now hiring we have to make sure our proposition is there.’ The management consultancy industry exists because of the quality of the people that work in the industry. In a sense, those individuals are the product and therefore, it is essential to consulting firms that they recruit the very best consultants. Steve Bevan, EMEA HR Director at A.T. Kearney, agrees with this as ‘our own staff are constantly being contacted by head-hunters and competitors.’
To give you an idea of what some business leaders are saying:
‘Our challenge is making sure we have the right talent and developing it.’ – Mike Melling, UK President of Alexander Proudfoot
‘We need to invest in value add human capital.’ – Harry McDermott, CEO of Hudson & Yorke
‘Our key challenge is going to be talent, attracting the best people from industry and university.’ – Jon Hill, COO at Avisen
‘We need to develop and recruit a team that are able to deliver against the increased activity in the life sciences consulting market.’ – Jim Tizzard,CEO of WCI Consulting
‘There is a War for talent…we are always looking for the very best in the market.’ – Richard Goodson, Vice-president at Hitachi Consulting
‘Our biggest challenge is getting good consultants; we set the bar very high. We need the best people who can deliver the very best solutions.’ – Tony Tarquini, Head of Financial Services Consulting at Capita Consulting
‘Our biggest challenge is people. People have to be developed in the right way, and we have to be the place the best people want to come to. We have to be an exciting place to work that invests in its people. That’s why we are heavily investing in our global L&D; portfolio, and are heavily investing directly in the people that we bring on board.’ – Tom Blacksell, Head of Consulting at Capgemini
In conclusion, the consultancy market is growing again. We expect to see hiring rates at around 30% of headcount over the next year. Attrition is on the rise, and so are salaries. This growth, although wide, isn’t to be seen everywhere. Executive level roles are coming up; financial services and corporate industry are both busy. The public sector has had a significant decline, but that is hanging in the balance. There is reason to be optimistic going forwards, and I hope that having read this article, you can share this sense of optimism.
This piece is reproduced from The Definitive Guide to UK Consulting Firms, a 400+ page careers guide for candidates looking to pursue a career in management consultancy. A free resource, this guide contains over 100 pages of career editorials followed by a directory of consulting firms active in the UK market – with over 380 employers listed and 189 employers profiled.
The guide is free to download in PDF format, with hardback copies also available from October 2011 onwards. Access your copy of The Definitive Guide to UK Consulting Firms (2nd Edition).