For the first time since the Management Consultancies Association (MCA) started collecting industry-wide data, the management consulting industry’s revenues fell in 2009. Our recent statistical report on the industry shows that the contraction compared with the previous year was around six percent.
The financial crisis and subsequent recession led to falling output and rising unemployment across the economy as a whole, though not in large parts of the public sector – that is still to come. Clients responded to the downturn as we expected; management consulting was certainly not immune to the general economic climate.
Recessions concentrate minds and accelerate change. Management consultancy has reacted by increasing its focus on the value that it generates for clients and by improving its own productivity. There was further growth in work last year to make businesses more efficient and sustainable. Evidence from the latter part of 2009 and early 2010 suggests that demand for consulting is already starting to pick up, a testimony to the value that clients feel they can gain from the industry.
Recent research from the MCA confirms that consultancy generates a significant return on investment for its clients. On average, across the range of work carried out by our members, benefits to clients are worth around £6 for every £1 spent. Applying this methodology to the whole industry suggests that the UK industry as a whole generates annual benefits equivalent in value to around £56bn.
We recognise, of course that today’s difficult economic climate means that organisations are under ever-more pressure to reduce costs and improve efficiency. It can be tempting to view consultants as an unnecessary cost. But this is often a false economy. Having the input and advice of specialised consultants can ensure that a project is completed on time, to a high standard and within budget.
There are many reasons why organisations choose to use consultants. Perhaps they need them to manage a particular project from start to finish or simply to provide extra manpower, knowledge and skills when needed. A common reason is the need to bring in expertise and skills which are not already present in an organisation. Large scale projects often require a very specific set of skills and engaging consultants is usually the most cost effective way of gaining the benefit of such expertise: the consultant is, by definition, hired for a specific timeframe or project, thus doing away with a costly recruitment process and the continuing costs of staff retention and benefits.
Consultants have experience across a range of organisations and sectors and will apply this knowledge to specific projects; they are well-placed to come up with the best and most cost effective solution.
Another common reason for engaging consultants is that, in order to get a project off the ground, an organisation simply needs extra help – and bright, energetic, capable people can help get a new initiative up and running whilst leaving internal resources free to carry on with the important day to day running of the organisation. Once a project is on its way, consultants may be brought in to keep momentum strong and ensure delivery.
Consultants can provide an objective view of their client organisation and the project, often saying what needs to be said but which has been too difficult and recommending what needs to be done. This way, organisations can tap into the creative thinking of consultants and come up with an innovative approach. For example, in cases of an industry or sector-wide threat, an organisation’s competitors may all have tackled it in the same way; so it may wish to differentiate itself from the pack and come up with a new approach.
When drawing up a shortlist of potential consulting firms, a good place to start is with the membership of the Management Consultancies Association. All the MCA’s members must have been in practice in the UK for at least three years and provide at least five client references. MCA members are independent and recommend the best solution for each client, without being swayed by allegiances to particular suppliers. Most importantly, member firms comply with the MCA’s Code of Practice which provides the consultancy buyer with reassurance that MCA firms maintain high standards. Within the membership there are a variety of types of consultancies, ranging from strategy houses and change management experts to HR consulting specialists and independent IT consultancies.
MCA members reacted to the recession by taking some of their own advice. Productivity rose considerably as consultancies focussed on helping their clients as efficiently as possible. Interestingly, they invested in their own expertise by making sure that they retained and expanded their senior staff numbers. Clients are increasingly looking to consultancies for high-level support and insight. Most importantly, consultancies are even more focused than ever on delivering desired outcomes and benefits for their clients; they know that clients are looking for value, whether in reduced costs, improved services or opportunities for growth.