I’m writing this piece because there is a predominant, though not universal, view among management consultants in my network that things will return to normal after a pause in operations. An increasing stack of evidence suggests that this is not the case. First, I will outline the reasons for the relative complacency of especially younger consultants. Second, I will present the evidence for this being a more significant challenge than most consultants realise. Third, I will suggest strategies for pivoting and surviving.
Let’s start with the complacency. Most consultants don’t remember a serious set-back in the industry. The 2008 recession was a mere blip in the steady 3-8% annual growth of one of the safest industry bets in the last fifty years. You have to go back twenty years to the DotCom bust for any serious dent to the inexorable march of the profession, and even this hardly touched the sides. Given the average tenure of a management consultant is eight years, the vast majority of these professionals will have seen nothing but growth, bonuses and success, creating a blind-spot for the consequences a massive crash.
The ‘chatter’, as they say on 24, among consultants, is that COVID-19 is a temporary pause. This is not the case: we are looking at a severe economic shock, potentially bigger than anything since the 1920s. Morgan Stanley predicts that US GDP will fall by 8% year-on-year in the second quarter and unemployment will rise to 12.8%, compared with just 3.5% in February. It may be worth reading that sentence again. The FT reports that retail sales are down by over 50%, and the Economist notes that half of small businesses, the major driver of GDP and employment, have a cash buffer to last them less than a month. I could go on, but you know the story.
In short, a long recession is looming, perhaps a depression, and for those of you too young to remember, the first thing to go will be client discretionary & procurement spend on consultants. Consultancies know this, and indeed, many have made their own projections: McKinsey, Bain, and Oliver Wyman suggest recovery being anywhere from a quarter to over a year away. Over at Source Global Research, they are estimating a hit of 20% on the consulting industry and nearly 30% for the UK market (which was already faltering due to Brexit). Certainly, out of forty or so graduates I know who have received offers, around half have been paused, replaced with secondment or a stipend, or in six cases, rescinded.
Of the 500 or so employed consultants I contacted, many are beginning to hear of significant changes. I have been told of redundancies in around 25% of large consulting firms already (though with massive variation by office) but it is very early days. Other firms have announced paycuts, forced holidays, The impact is being felt most in smaller boutique firms which are either over-exposed on their client base or don’t have the resources to carry benched consultants.
If the 2008 recession is anything to go by, the following is likely to be characteristic of their approach:
- Major firms will take their time before redundancies are announced as (a) they have the cash to hold onto benched consultants (note, being privately owned as a partnership helps here!) (b) they wait to see how bad it is and (c) they plan their HR & communication strategy and plan. However, redundancies will happen.
- MBB, however, will hold onto their people, even if it means Partners putting more money into the business. They have very deep pockets, are under no pressure from shareholders, and will be advising clients on how to deal with COVID-19. Other large private consultancies (e.g. Deloitte and KPMG) may also have the reserves and the reputational need to maintain headcount. See this for reassurance (though I’ve heard Deloitte making redundancies in Canada!).
- If you have been on the bench for more than three weeks, you are likely to be first in line. Middle management (senior consultant, director, junior partner) are likely to be hit hardest as margin is made on juniors, but the senior partners will protect themselves.
- Hard-hit sectors (airlines, tourism, retail) will cut back on discretionary spend, but increase their restructuring spend. The net effect will be a loss. If you work in these sectors, prepare for the email.
- Internships will be maintained. These are cheap and flexible.
- Graduate hiring will continue at a lower rate, and graduates will be reassigned to growth areas.
So, if you are in the firing line, what to do:
- Get your CV out to consultancies. Visit this thread to see who is hiring, and think specifically about restructuring consultancies (e.g. lvarez & Marsal or Alix Partners), crisis management, cost reduction, digital transformation……..or healthcare.
- Get your CV out (ii). Move to the client side. Visit the thread above, and think specifically about industries that are potentially growing (VOIP video, Cloud, Big Data, in-fact online ANYTHING at the moment, but especially). Contact old clients that you stayed in contact with (you did that right?!) and message LinkedIn contacts.
- Learn something that will make you instantly more valuable. Python, AWS, AI, Big Data, Cloud, automation, machine learning…. whatever. Find a course, do it. Linux Academy is good if you can expense it, if not Khan Academy or even Youtube.
- If you’re on the bench make yourself useful internally. Tap up Partners for crucial internal or IP work that really adds value. COVID-19 seems to be a hot topic: write something, raise your profile, appear indispensable.
- If all else fails and you’re ‘coached out’ and have no alternatives, there’s a rather splendid MBA course I teach on…….