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Associate Consultants: the intelligent staffing solution for the consulting industry?
By Richard Stewart
Research indicates that the four main pipeline challenges facing consulting firms today
are their desire to grow, volatility in the market, staff turnover and the increasing demand
for specialist expertise. In June 2005 a survey was conducted using 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 on a
particular consulting skill, such as 7 days (operational change). These companies
succeed by leveraging deep expertise in their chosen areas, and by being upfront to their
clients about their competencies. They are staffed by people with years or decades of
relevant experience in the specific industries or consulting areas.
The challenge facing consulting companies is how to recruit the specialist expertise
required to win and deliver work in the new consulting environment cost effectively. It is
little surprise that associates are an increasingly important part of the consultancy
staffing mix.
Associate staffing: major growth theme
Data from the MCA for member companies 2002-2004, shows that the major growth
theme in staffing to emerge across these years is in associate staffing. This increased
5% in 2002, 12% in 2003 and 7% in 2004. Our own experience indicates that major
consulting firms, including several top strategy consultancies, have been modifying their
staffing models over the last 3 years to make much greater use of associate staffing.
This started during the consultancy down turn as these companies sought to minimise
fixed costs. However from 2004, when the market started to pick-up, associate staffing
has continued to increase. In the June 2005 Mindbench study of 21 consulting firms,
70% of these firms said they expected to increase their use of associates from 2005 to
2006.
And the other side of the coin driving the associate model is its popularity amongst
consultants themselves. We estimate that there are around 60,000 management
consultants working permanently with consultancy firms in the UK and around 10,000
independent or associate management consultants with previous experience in
permanent consulting roles. Consultants are choosing to work as associates because it
offers them the opportunity to choose work that they are genuinely interested in. It also
gives them life-work balance, and the potential earnings although not guaranteed are
comparable to, or higher, than those achievable as a permanent employee. We expect
the trend for work life balance and a portfolio lifestyle to become more widespread,
and the numbers of consultants working or looking to work as associates to increase
substantially over the long term.
Why firms are turning to associate staff
Capacity management and the requirement for specialist skills are the key reasons for
consultancy firms using associate staff. Associates can be an excellent way to manage
capacity because there are only costs to pay when they are utilised and generating fee
income. Associates can be an excellent way of managing specialist requirements
because a consulting company through a wide associate network can access a vast
array of specialist skills which only need to be called upon from time to time. Rather than
having these people sitting on the bench as permanent staff, the associate model
means that consulting firms can build dedicated teams which include sector and
consulting skills experts cost effectively. It should be possible for consulting companies
to transfer their financial pipeline risks to associates without increasing their overall
costs.
There are, of course, difficulties in achieving effective associate staffing, mainly linked to
quality assurance and availability of the required expertise. In order to tackle these
challenges consulting companies need to invest in their resource management function
and possibly partner with a dedicated resource management company. This ensures that
the same high standards are applied to associates as to permanent staff in terms of
interviews and that firms have access to a sufficiently wide pool of associates to ensure
availability of the right skill sets. When demand falls, associate staff are off-loaded,
reducing overheads. Permanent staff remain, protecting the core capabilities, client
relationship management, and good-will of the firm. Some regular associates are utilised
even when demand is at the bottom of the cycle because they bring specialist skills
which are needed for particular projects. The number of associates utilised increases
during the upswing of the cycle as they take on more generalist requirements. When
there are demand surges the wider pool of associates is called upon.
Associate staffing provides an intelligent means for consulting companies to grow their
businesses effectively given pipeline volatility, the demand for specialists and high staff
turnover. It is the flexibility and cost-effective nature of associate staffing that appeal to
consulting companies. With more consultants interested in the option of associate work,
and many firms prepared to adjust their staffing models, the associate staffing trend is
set to continue.
About the Author
Richard Stewart writes about management consultants. Learn more at http://www.mindbench.com .
Article Source: http://www.simplysearch4it.com/article/15084.html
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