Consultancies deliver higher productivity and value in response to recession

Despite seeing revenues fall by 6 per cent in 2009, roughly in line with the contraction in GDP, a new Management Consultancies Association (MCA) report, from recession to recovery, has found that management consultancies were in demand when it came to helping organisations improve efficiency and save jobs. The report found that the UK consulting industry is now estimated to be worth around £8bn.

The MCA Industry Report, launched today (12th April 2010), found that process re-engineering work, which helps organisations strip out unnecessary costs by looking at processes in their entirety, grew by 5 per cent on top of a 31 per cent jump in 2008. The industry also helped organisations deal with the recession’s impact on their staff – with a 6 per cent growth in HR consulting.

In contrast, strategy consulting was down by almost a quarter. The report says that this is usually the main casualty of any recession so far as the consulting industry is concerned and reflects the extent to which the buyers of consulting have changed priorities.

Focusing on value proves productive…
MCA member companies achieved significant improvements in their own productivity and business model during this recession.  By the end of 2009, the average consultant was 7 per cent more productive for their consulting firm than 12 months earlier.

Overall, the numbers of people employed by MCA member firms fell by 15 per cent to 40,000. However, the number of senior people across the industry also rose by 10 per cent, an indication of consulting firms’ willingness to invest in expertise and experience, even during the recession. By focusing on the value they add, consulting firms faced less pressure on fee rates than in previous downturns.

Largest market for consulting declines, but already shows signs of bouncing back
Demand for management consultancy in the financial services sector fell by 12 per cent during 2009 on top of a 6 per cent drop in 2008. But anecdotal evidence suggests recovery started in Autumn 2009 – with the sector commissioning a larger number of longer-term consulting projects.

Alan Leaman, Chief Executive of the MCA, said:
“It was a difficult year for the industry, but MCA members have adapted quickly and focused on a high-value add strategy. While there were few parts of the private sector where demand for consulting services remained unscathed, there is already anecdotal evidence that the financial services sector is showing signs of a return to growth.”

Helping the public sector cut costs and improve delivery…
The level of spending on consulting in the public sector was static. Central government’s expenditure on management consultancy fell by 8 per cent, while the use of consultants in local government increased by 11 per cent as local authorities put in place efficiency and cost-cutting measures in anticipation of future spending cuts.

Alan Leaman said:
“There will be significant pressure on public spending in 2010 and for many years to come. But the public sector will also need the help of management consultancy to raise its own productivity, improve public services and cut costs. We are pressing for more payment by results contracts in the sector as this will demonstrate clearly that consultancy delivers high value for money.”

The recent MCA report, he Value of Consulting, demonstrates that consultants generate a significant return on investment for their clients. On average across the range of work carried out by MCA members, benefits to clients are worth around £6 for every £1 spent.

Pat Newberry, President of the MCA and Partner at PricewaterhouseCoopers concluded: “Recessions accelerate change and stimulate higher levels of performance. If Britain has got through this period with lower unemployment than many feared, to a significant extent this was due to the efforts of thousands of management consultants who enabled their clients to cut costs, save jobs and weather the storm.”