Skills shortages have long driven growth in consulting and the broader professional services market. The ability to leverage those opportunities post-pandemic will re-shape the industry.
“A lack of goods, services and people means that red-hot demand is increasingly met slowly or not at all. There are already signs that supply bottlenecks may lead to nasty surprises which could upset the post-pandemic recovery.” wrote The Economist. “Companies are trying to go from 0 to 60 and it shows.” In the US, new jobs aren’t being created as fast as expected and job vacancies are soaring, suggesting that companies are finding it hard to fill positions. Although these are observations about the economy as a whole, it’s hard to find a better summary of the problems starting to assail the consulting industry.
Demand for consulting services had already reached record highs before the crisis: Our market tracking data indicated that, on top of 8% growth in the global consulting market in 2019, 81% of clients at the start of 2020 expected to use more support in the next 12-18 months—the highest we’ve recorded in the six years we’ve been monitoring this statistic. Even at the start of this year, despite short-term cutbacks in consulting support, 74% of organisations said they expect their use of consulting services to grow. Ignoring the anomalous performance of 2020, this points to a structural shift in the relationship between clients and consultants. Research we carried out in late 2019 pointed to a growing expectation that organisations would need to rely more on external support in the future, even in “core” business functions. The main reason organisations gave was that they were finding it increasingly difficult to attract and retain people with the skills they needed—specifically, fast-moving technology skills. Fast-forward to the late stages of the pandemic, and there’s a dawning realisation that thriving in its aftermath won’t just depend on technology, but on people—their capabilities, how they work, how their teams are organised and interact, etc.
Skills shortages on the client side will drive up demand for consulting support. Able to specialise in specific areas, consulting firms are seen to be better able to recruit and retain experts in areas of high demand. Indeed, the whole business model of consulting sits on the intersection between expertise and organisational flexibility: Consulting firms can supply teams of experts far more quickly than clients can pull together if left to their own devices. However, few firms manage to provide both of these things—expertise and flexibility—well. Some sacrifice depth, focusing instead on being able to provide teams of intelligent generalists; others do the opposite, building small teams of experts that have limited capacity.
The mass shift to remote working has both eased and complicated this picture. It’s now far simpler, faster, and cheaper for clients to speak to a world-class expert in a consulting firm than it was 18 months ago. No one—clients nor consultants—expect this to change back. However, Teams, Zoom, etc. raise the expertise bar: Gone are the tiny distractions, the personal chemistry, the small talk that’s traditionally been part of business meetings. Instead, clients can focus more on the content, on who’s saying what—and, far more threatening to the partners who join project calls only occasionally, who doesn’t know what they’re talking about.
Put surging demand together with the need for different post-crisis capabilities and far greater attention being paid to the quality and depth of expertise, and you get a serious problem. There weren’t enough consultants before the pandemic, and there are even fewer now with the right kinds of capabilities. No wonder, then, that every firm we speak to is trying to model not simply the volume of capabilities they’re going to need, but how best to recruit, organise and retain them. Clients, we know from our research, are looking for more radical solutions, implemented more quickly: That’s precisely what consulting firms will need if the post-crisis boom isn’t to morph into supply-side chaos.