Posted , in Business model
Human resources—Is the end nigh?
Some will say they had it coming.
As a group, chief HR officers and HR directors have never had a particularly comfortable seat at the corporate table. Outgunned by COOs, CFOs, and CIOs, most have found it difficult to make their voices heard; usually unable to measure the impact of what they do, they’ve often been consigned to the margins of decision-making. Now, to make that worse, much of what the HR function does is being swallowed up by shared services centres—and that’s just a prelude to complete digitisation. Employees can do increasing amounts of admin themselves, and they have a greater incentive to ensure personal information is accurate and up-to-date. Sifting through candidates for recruitment can be done by algorithms. Who needs HR anymore?
It’s tempting to say that the consulting industry does.
We estimate that the HR consulting industry, excluding implementation, regulatory compliance work, and hardware and software, was worth around $7.3bn in 2015. Not the biggest of consulting markets (using the same definitions, the technology consulting market was worth more than five times as much), but one that’s been attractive to strategy firms and the Big Four in the last decade because they’ve been able to take advantage of a chronic lack of innovation among the conventional HR consulting firms to grow their market shares.
However, much of this growth has come from relationships outside the HR function—from CEOs who recognise the importance of strategic workforce planning at a time of demographic change and growing barriers to mobility, and from CFOs; many of whom now have ultimate responsibility for HR. The disappearance of the CHRO is only going to make this easier for the Big Four and strategy firms to sell their services, precisely because they haven’t had strong relationships with this group in the past. The rapidly changing face of the HR function and the pace of digitisation creates an opening for technology firms to increase their market share, too.
But whether you’re an HR specialist looking to fend off new competitors, or a non-HR firm looking to exploit the changing market conditions, it will be crucial to be able to offer a multidisciplinary approach. HR expertise will need to be melded with the capability to re-design processes, prototype digital solutions, and create integrated platforms that combine consulting with managed services. Saying that you do this is one thing, but making it a behind the scenes reality is far more of a challenge. For strategy and technology firms, the issue is how quickly they can build (or buy) the missing pieces in their particular jigsaw puzzle. The Big Four have all the pieces but the latter have typically been broken up into different business units, and these silos can be reinforced by different remuneration structures, culture, and of course organisational politics.
The demise of the HR function represents a huge opportunity for consulting firms. The irony is that they have to solve their own, internal HR issues if they’re going to seize it.