With everyone trying to figure out what the economic downturn means for the consulting sector, I thought you might appreciate me sharing the insights I’ve gained from a series of meetings I’ve had these last weeks as part of the roll-out of the ConsultancyRoleFinder service?
Certainly since my last blog post the recession has started to hurt the UK consulting sector - and to impact the amount of recruitment that's taking place. It's also brought about a not insignificant number of redundancies, particularly in the strategy consulting sector which seems to have been hardest hit.
I wouldn't say there's been a meltdown in the UK consulting market or the recruitment space - but certainly we're facing the toughest trading conditions since the dot-com crash and not everyone will emerge from 2008/9 unscathed...
Order pipelines healthy but staff utilisation worryingly low
The usual drop in staff utilisation expected over the Christmas period seems to have struck early, with many consulting firms attesting to lower-than-expected staff utilisation from mid-November onwards. As you might expect, it seems to be the strategy consulting practices that have been hit hardest in this respect with significant numbers on the bench. Where an unexpected drop in utilisation has been seen, this has naturally translated into some hesitancy in terms of hiring activity. Delayed start dates for new hires, a dragging out of interview processes and recruitment freezes have all become increasingly common in the weeks since the demise of Lehman.
On a more positive note, the hiring activity being planned for Q1 2009 does look markedly higher than what we’ve seen in the latter part of Q4 2008 – with expectations that improving order books will translate into higher staff utilisation in the New Year. That in turn will mean an increased need to bring on board new blood. There’s also some evidence that firms are shedding staff in the underperforming parts of their businesses right now but will need to recruit for the stronger parts of their businesses as 2009 unfolds.
So overall we’re expecting some recruitment pickup as we enter 2009, though the caveat here is “provided nothing further happens to prolong the period of low staff utilisation”.
Recruitment agencies the winners and the losers
There’s also a real polarity in behaviour amongst consulting employers as far as I can tell in terms of the recruitment strategies being adopted in light of the tighter economy. At some firms there’s now a massive focus on bringing down the average cost per hire in 2009, so a drive to generate far more direct hires. At other firms the focus is very much on ensuring all recruitment spend is tied to a successful hire – ie. there’s a drive to switch all recruitment to contingency-based recruitment agency assignments and away from direct advertising and retained work. On balance I would say my meetings favour recruitment agencies being busier in 2009 than they have been in the last months.
However the fly in the ointment is whether all the recruitment agencies will have survived to serve this need. Certainly the delayed start dates and recruitment freezes of the last months have hit recruitment agencies hard from a cashflow perspective. Whilst most still have plenty of assignments to work on, it’s clear that the conversion to successful placements has suffered – and that delayed start dates are pushing back the payment timescales for those success fees that are being generated. Many hitherto successful businesses have been left very stretched by these factors and I fear there will be the odd firm going out of business as a consequence. Hopefully not.
Your thoughts on the above? Please do share via comments below.