by Nick Martin
This might be the most important piece I’ve ever written about facilitation, training and consulting.
My only worry is that I say too much here about our future strategy. Ultimately, however, I’m a huge believer in transparency. I believe that real progress comes through execution, not just ideas.
This post is our thesis on the future of consulting and a statement about our forthcoming direction. I’m being very open here about our strategy. If you want to know what core beliefs, theories, and assumptions are driving us, then keep on reading.
But first, some housekeeping …
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Where We See Consulting Going in the Next 5–10 Years
Right now, almost every business is going through some level of disruption. Consulting is no different.
In a lot of ways, traditional global consulting firms are on a collision course with irrelevance.
10 years ago, if you were looking to run a major change program in either the public or private sectors you needed a global consultancy to come in to run the show.
The trade-off for taking this route rather than keeping the work in-house, of course, was they were expensive beasts to hire. Still are.
Consultant rates have always been high
Now we have nothing against companies like Accenture, KPMG, Bain and PriceWaterhouseCoopers. In fact, in many cases we think these companies provide a great product delivered by fantastically talented people.
But they do charge many multiples more than someone doing a similar job in-house.
Every employee knows how much a consultant costs now. And they don’t like the fact the same company who refuses to give them an inflation-matching raise each year are OK with paying over the odds for resources who do a similar job to them.
In today’s financial climate, where your costs are constantly under the accountants’, shareholders’ and customers’ magnifying glass it pays to be prudent.
Customers don’t like exorbitant displays of wealth
Neither do employees, neither do shareholders. Only hedge funds seem to buck that trend but they don’t care no-one likes them.
You need to be using consultancies in the right way and for the right reasons.
The 4 Forces Affecting the Consulting Industry
There are 4 forces in play changing the the consulting space:
- Force #1: Companies continue to need outside consultancies with the best talent to come in and deliver a high-quality project.
- Force #2: Top consultants are choosing the world of independent consulting so they can take back control of their diary and work/life balance.
- Force #3: The Rise and Rise of the Gig Economy.
- Force #4: Organisations need to save money to maintain service levels and keep customers / employees loyal.
Let’s break this down by talking about …
Force #1: Companies need outside consultancies with the best talent to come in and deliver a high-quality project
The 3 main reasons to hire a consultancy are:
- Consultancies have major talent and experience on their books. 10 years ago if you were a top consultant you worked for a top consultancy. Many still do. Yes the hours are long but the projects are top-drawer and money is good. In the past if you wanted top talent to work on your project then you hired a consultancy. There were no other choices.
- They have been there and done everything. Their experience is unparalleled. If you are running a change program it is fairly likely it is the first time you and your company have attempted a project of this type and scale. Not for consultancies. As a project sponsor you look for companies that have got results on exactly the kind of the project you are running as it increases your chance of success.
- If things go wrong or the outcome is likely to be unpopular you have someone else to point the finger of blame at. It was, and still is, a win-win situation for the hirer. Your future is covered whether they delivered or not.
Back in 2007 life was different
The sustained financial downturn we are in today is about to turn 9 years old. Here is what I remember from those days.
When a public organization wanted to change something they would invest money in the situation. There was plenty in the bank so why not?
There was no such thing as austerity back in 2007
The country borrowed to finance the public purse, amazing ideas to improve service provision were conceived and consultants were brought in to make it happen.
The same dynamics were happening in private companies too.
Want to run an off-site with the department? Hire an outside consultancy. Next board strategy meeting? Hire a consultancy. That market research project no-one wants to do? Bring a consultancy in.
Consultancies had the much needed impartiality required to make the deliverables happen. Plus they had all the top talent. They were the obvious choice.
Hiring a consultancy is very alluring
The prospect that a crack team of experts will swoop in, solve all your problems, mitigate all your risk and swoop out again leaving verifiable results behind is enticing.
Plus you don’t need to worry about hiring or firing individuals. If you don’t like one of them or you think they’re not up to scratch out they go for another one to come in in their place.
All that convenience comes at a price though. And that price is a whole boatload of money and do you always get the value back?
Consulting firms do not reveal their fee structure
They manage their fee structures as ‘trade secrets', similar to salaries, which are also shrouded in secrecy.
In addition, fees commonly vary per region/client/service offering, so firms keep tight control over their fee structure to minimise the threat of reputational risk, public debate or having to renegotiate their fees with clients.
As a result, there is relatively little publicly available information on the fees and rates charged by consultants. What is known, though, is that rates can widely differ, from an hourly rate of $100 USD per hour for an interim consultant working on an operational level to $500 USD or more per hour for a consultant from a leading strategy consulting firm.
And then you have the partners who might charge you $1000 USD per hour for their presence. Luckily you probably won’t need them full-time.
Consultancies argue that they ARE value for money
And in many cases that’s absolutely true but there is no escaping the fact that they are expensive and you are still not guaranteed success.
It’s pretty tough to find a consultancy willing to back themselves to deliver enough to offer you a guarantee in the form of a penalty structure if they don’t achieve what they say they will.
Consultancies have their problems too
Each consultant was expected to bill at least $400k+ USD annually for their company and would take home 20-30% (after fees and commissions).
Not enough went back to the consultant and a lot of consultants resented that.
Employees of the client would also resent their managers for spending company money on consultants rather than investing more in their own employees.
All these consultancies have deep management structures where the people at the top are earning huge salaries without doing much real work themselves. Fat cat executives and their growing disparity in pay between them and their workforce is rarely out of the newspapers these days.
Consultants often experience long hours with no time for home and family
Leaving for work before your kids had woken up and getting home after they had gone to bed isn't much fun. It makes you wonder why you are doing it all, and your time was rarely your own.
Which is why Force #2 exists...
Force #2: Top consultants are choosing the world of independent consulting so they can take back control of their diary and work/life balance
“Take back control”. Catchy expression.
Top talent are turning to freelancing as a career choice. According to Forbes “the freelance economy grew to 55 million Americans this year — 35% of the nation’s workforce.
More are heading in this direction because they believe life is too short to spend it away from the family.
Don’t get me wrong. There are lots of people who enjoy working at a large consulting firm. Many of the projects are still huge & sexy. The lure of assignments like these is too much for many. Especially newly minted MBAs.
But consulting firms work their staff hard
They have no choice if they want to stay profitable as they charge their staff out by the hour.
Consultancies hire smart people and smart people also have lives outside of work.So they naturally gravitate towards independence. The benefits include own timetable, own rules, pick and choice of projects, own billing rate that you see 100% of the income. Complete freedom.
I’ve lost track of how many times I’ve heard someone say how much more they enjoy life when they make the switch to independence. The WorkshopBank community has more than 10,000 people in it who have chosen this path.
Being independent isn’t a bed of roses
It has its hardships and difficulties.
Unless your network is super large (and even if it is) you still need to dedicate a lot of time and effort to business development, networking, and winning projects.
Developing new business is a function done for you at a consulting firm
Lots of people don’t enjoy it. Others aren’t very good at it. Winning work has its own set of skills and competencies that many have to learn from scratch.
If you work in a consulting firm you are often brought in for the fun implementation and delivery stage. When you are on your own you are the one responsible for all the pre-sales graft. It is not easy and it takes a lot of time.
Plus organisations tend to be very nepotistic when it comes to trainers and facilitators.
That is because the deliverables often include soft metrics as well as hard.If one of your objectives is to build a stronger team spirit then how do you measure whether that has been achieved or not?
If you are responsible for hiring someone you will likely go with someone you know, someone you have worked with before, or someone who is recommended to you.
One of the biggest hurdles for most contractors is business development and filling their project pipelines.
Some 34% of respondents in a recent survey by Contently, which matches independent writers and businesses, said that securing enough work was their biggest daily obstacle.
Luckily we have Force #3 to help us here...
Force #3: The Rise and Rise of the Gig Economy
What exactly is the Gig Economy?
The Gig Economy is the term given to people who work lots of small jobs, as well as, or instead of a full-time job.
Technology and the internet has helped promote and grow the Gig Economy by helping give birth to popular websites that bring customers and workers together.
There are strong opinions about whether the Gig Economy is truly a force for good or not.
Those who provide services in it love the freedom of flexible working hours and the ability to charge what they feel the market can bear.
Customers love the Gig Economy too
Why? Convenience is a factor, you can always count on the person delivering the service being ready and willing to deliver.
So too is service level. Gig Economy platforms tend to have review systems built into them where the customer is asked to report how their experience was. This encourages a higher level of service.
Also the platforms themselves are excellent at managing expectations.
Uber receives a lot of bad press but it's hard to criticise the customer experience
When you hail an Uber it arrives when it says it will and it costs what it said it would, if not less. Clear expectations are set up front and they are often met or exceeded - the key to a happy customer.
A recent McKinsey report (October 2016) that surveyed 8,000 people across Europe and the US found that "up to 162 million people in Europe and the United States or 20 to 30 percent of the working-age population—engage in some form of independent work."
It goes on to say "free agents reported higher levels of satisfaction in multiple dimensions of their work lives than those holding traditional jobs by choice, indicating that many people value the non-monetary aspects of working on their own terms."
The proportion of those surveyed that have used a digital platform to find work is relatively low at 15% but growing fast.
There are some challenges to be resolved in the Gig Economy such as the benefits system, job security and recourse but the growth in this type of work could have significant tangible benefits on the economy and levels of unemployment.
Force #4: Organisations need to save money to maintain service levels and keep customers / employees loyal
2008 feels like a lifetime ago doesn't it?
Barrack Obama was just starting his first term. Fidel Castro retired as President of Cuba after nearly 50 years. Usain Bolt broke the 100m world record in a pitiful 9.72 seconds and Bill Gates stepped down as Chairman of Microsoft.
All significant events for sure but 2008 will forever be most famous for the collapse of the world economy. 9 years on and we are still dealing with it.
We have had crashes and downturns before but nothing in recent memory has changed the way companies have to think and behave as much as today.
Margins are tight, competition is fierce and oversight of organisational practices is closer than ever before.
A bad story can spread over social media fast and hurt a brand overnight
It takes years to build a reputation and seconds to shatter it.
Just ask the likes of Starbucks, Amazon and Ikea. All accused by the EU of allegedly dodging corporation tax by funnelling their profits made in Europe to low-tax countries like Ireland and Luxembourg.
Their CFOs say they have a fiduciary duty to their shareholders to minimise their tax burden as much as possible.
Many others complain their accounting practices gives them an unfair advantage allowing them to charge less in order to artificially inflate their margins.
It is a problem that will likely be solved with a worldwide agreement over the next 10 years I believe.
Every area of an organisation must save money for it to remain competitive. So what to do if trying to circumnavigate the tax system is not for you?
Save money on your costs of employment
There's no doubting that in many countries the costs of a permanent employee is a lot. 40-100% of an individual's base salary as an estimate.
When you factor in employment taxes, holidays, sick pay, training, equipment, car, health care, insurance, maternity leave, paternity leave, and potential redundancy costs the base salary quickly spirals upwards.
More companies are hiring contractors direct
Yes the base salary is often greater but it is a simpler arrangement, less risky for the hirer, and in many cases the quality of the deliverables is better because the person has been chosen with specific objectives in mind.
So the hiring company is happier and so too is the contractor.
When technology is deployed successfully it allows hirers to be more sure than ever before that an apparent stranger is what they say they are.
It allows them to be more confident of the quality / result and more accepting of the risk because saving money is more important.
So to summarise...
Consultants provide an essential service in the lifecycle of a corporate or organisation:
- Consultants give you political cover: Directors and executives sometimes need to make unpopular decisions and bringing in a consultant to prepare the ground for that decision helps them a lot. The consultant provides ammunition for them to take to the board or steering committee and the executive is able to distance themselves personally by lumping all the blame on the consultant.
- Consultants help you share knowledge across levels and functions: In large organisations cross-functional and cross-level sharing rarely happens without a very good reason. People are just too busy. When a consultant is involved who isn’t a part of the client’s culture or politics they are able to setup and run special workshops and events that bring those disparate people together behind a common goal. Just getting different functions and levels together typically unlocks hidden away creativity and relationships.
- Consultants have an obsessive focus on one problem: All roles within a company have a day job to do. Realistically you can only focus a portion of your time on a particular issue. Consultants, on the other hand, don’t have this burden. They also tend to be unbiased so can focus deeply on the problem at hand. Hiring a consultant means you have a dedicated person, who you have hopefully verified is smart before hiring them, to help you solve any major pain point of your choosing.
Consultants are here to stay but the landscape is changing.
Here is the problem...
If traditional consultancies are losing their top talent to the independent consulting world while organizations still need top consultants to solve their problems but are short on money, and independent consultants find business development hard, what’s to be done?
That’s where Projects by WorkshopBank comes in.
P.S. Questions? Use the comments section below. I reply personally!