Is your consulting firm really necessary?

By Fiona Czerniawska

This isn’t a question about whether we need consulting as a service – I, for one, can’t envisage a world in which organisations don’t look for some type of help from the outside.  It’s one about whether such services need to be delivered by the collective entity of people which constitutes a consulting firm.

Perhaps the most thought provoking statistic in our new report, which looks at the prospects for growth by sector for the global consulting industry in 2014, is the one comparing clients’ motivations for using consulting firms. Roughly two thirds of all consulting work is motivated by factors relating to individuals (specialist skills, help with implementation, extra pairs of hands during busy periods), while the remaining third relates to what we could loosely term ‘corporate’ consulting (responding to regulatory change, independent validation of decisions, and support in planning and running the largest projects).  If we ask clients how these two broad uses of consulting (individual and corporate) will change in 2014, 25% say that their use of ‘individual’ consulting will grow, more than twice the proportion who say their use of ‘corporate’ consulting will rise.  This is percentage of people, so you can’t automatically translate that into differential growth rates, but it unquestionably points to faster growth for the individual side of consulting.

Why does that matter?  You could argue it doesn’t: clients hire individuals from firms all the time (some large companies we’ve been talking to recently estimate that a third of what they buy from big firms is, in fact, individual consulting).  But growth in individual consulting tempts firms into body-shopping – and we already hear plenty of evidence for this: “It’s very hard to argue with a fellow partner whose key client has a large pot of money available for staff augmentation,” said a senior partner we spoke to recently.  The trouble is that body-shopping brings down rates and squeezes margins but also makes it harder for consulting firms to link their work to results, which in turn reduces the value ‘the firm’ is seen to add.

Not surprisingly, many firms we talk to are looking at how they can fight back and better articulate the value the firm can add – demonstrate, in effect, that the whole is greater than the sum of the individual consulting parts.  Quality of people is important, but unfortunately they take that with them (having a well-known strategy firm on your CV remains a valid passport for many years).  Brand is important, but only for certain types of work – a point that procurement departments have become increasingly clear about as they search for smaller, cheaper firms. But there are three aspects of ‘corporate consulting’ which clients do value:

• The ability to field genuine experts from different parts of the world – “We identified an issue in the morning and, by the afternoon, I was on a phone call to a partner on the other side of the world who’d had direct experience of this,” enthused a client we recently interviewed.
• A willingness to be accountable for results – our research on client perceptions demonstrates just how much influence these have on what clients think.
• A resourcing model which is more flexible than the clients’ own – this may sound contradictory, a way of reintroducing body-shopping by the back door, but the weaknesses with the way client organisations and conventional body-shopping firms move people around is that they primarily depend on who’s available, not necessarily who’s best.  ‘Corporate consulting’ involves demonstrating that a firm has system (not just a database) for consistently matching exactly the right person to the right piece of work then they have a huge advantage.

‘The firm’ is necessary – but it needs to prove that.