Posted , in Differentiation
Mission impossible? Can people firms arise from the periphery in Oz?
In a break to the norm, and to give ourselves a rest from barking on about digital, we thought it might be interesting to look at one of the major standout non-trends unearthed by our 2018 Australia Consulting Market report*: the flatlining and blink-and-you-may-miss-it performance of people (HR) firms. And it’s pretty dire.
Claiming just 1% of market share, it’s abundantly clear that traditional HR firms haven’t quite managed to acquire the agility needed to outmanoeuvre the Big Four and strategy firms—and anyone else with a killer instinct—to keep pace with the times and remain relevant.
Why? Well, both in Australia and around the world, HR consulting has seen relatively slow growth in recent years, as clients’ need for support in this area has either been piecemeal or generally just lower down the list than, well, pretty much anything else you can think of. What’s more, a real and perceived chronic lack of innovation within HR firms means that barriers to entry have been low, allowing other firm types to move in on this space with relative ease. So a market that was already fiercely competitive during the least crowded of times has now evolved to a point where convergence is threatening to send HR firms into oblivion. And while there’s no one sure route to survival, we did learn about some pockets of hope in Australia.
Client appetite for digital solutions has opened up new opportunities for HR firms operating here—in talent assessment tools, for example. Developing digital solutions (ideally ones that can be delivered along with people-firm expertise) may help firms counter any negative stereotypes around being resistant to innovation and thus drive more opportunities.
Another opportunity HR firms should continue the good fight for is around change management, particularly now that Australia’s clients are slowly waking up to the importance of addressing the impact that transformation (digital or not) is having on the workforce. Right now, this is an area of demand that’s still largely for the future—the majority of Australian clients we spoke to this year told us that they don’t yet see people-related services as being a critical component of digital transformation. But if trends in other major markets are anything to go by, these clients will be coming around soon. This should be good news for people firms, which tend to have solid change management expertise. But for now, at least, it’s not quite that simple: In markets that already have a big interest in change management, clients are tending to give this work to the Type A (accounting), Type T (technology), or Type S (strategy) firms carrying out the larger overarching transformation initiative.
All is not lost, however, and the fact that Australia’s clients aren’t yet paying great attention to change management means that people firms still have an opportunity to convince clients that they’re best suited to the job. But if people firms are to have any chance of avoiding the fate their peers have suffered in other markets, they have a lot to do: They’ll need to dig deep and find ways of increasing their investment in a multidisciplinary approach, mixing HR expertise with the ability to redesign processes, and producing new, innovative digital solutions that capture the imagination of clients—in essence, proving enough value-add to lure clients away from other firms who offer the convenience of end-to-end transformation solutions.
Given the might of the competition, however, one thing is for certain: To go one better than holding on to that remaining, precious 1% market share, a herculean effort on all fronts is going to be required by Australia’s people firms.
*And just to confirm, the main trend fuelling change and growth in the Australia consulting market today begins with “d” and ends with “obviously”.