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Should Mercer digitise all of its business?
The birth and death in a single day of a proposed deal between Aon and Willis Towers Watson is a salutary reminder of the turmoil still impacting the people services and consulting sector. Both firms are, of course, better known as insurance brokers, but both have consulting businesses, advising clients on a raft of compensation and HR-related issues.
We’ve just published a short white paper on people-related consulting services, which argues that recent growth in this part of the market is largely attributed to the recognition that digital transformation projects depend, not just on new technology and processes, but on changing the behaviour of people. This has allowed a part of the consulting industry that has chronically under-invested in innovation (“They’ve got nothing new to say,” is how one client put it to us) to tuck into the slipstream of growth that’s come out of transformation work. But—as is so often the case—clients give with one hand but take back with another. Growth in transformation-related consulting may boost one aspect of HR work, but it will drain the budgets left for other HR services. Technology and strategy firms, and the Big Four—all of whom have seized the opportunity over the last 10 years to grow their share of the people services market—will benefit from this. By contrast, the HR specialists—Mercer, as well as Willis Towers Watson and Aon—are likely to lose out because their foothold in the high-growth transformation market is tenuous at best. This will leave them firmly in the low-cost part of the consulting market, delivering services that clients are familiar with, and which depend on deep but essentially repeatable expertise. Success will depend on efficient service delivery (and consolidation as a means of driving economies of scale would support this); going forwards, it will also depend on increasing automation.
These firms would argue that they’ve spent the last decade preparing for this future by offering managed services, taking over HR-related processes client organisations have done in-house in the past. But these aren’t necessarily the type of managed services clients are looking for today. As we’ve written elsewhere on this blog, clients are now looking for a new type of service, one that integrates software, proprietary data and deep consulting expertise in order to tackle a very specific issue for a client for a period of time (longer than an equivalent consulting project, shorter than the 10-year deals that’s been typical of traditional managed services). Some of the consulting work these firms do could undoubtedly be relaunched in this new, more specific guise, but there’s an argument for taking a more radical approach.
Factories are now being built that have no people in them. The work they do is entirely automated, and progress is monitored remotely. When problems arise, people can be sent to fix them, rather than being based there permanently. So, do we need people to deliver people-related services? Couldn’t a firm such as Mercer automate almost every aspect of its advisory and managed services? Yes, people might occasionally be required, but perhaps more in the vein of SAP supporting its software with people. This strategy would respond to clients who are looking for low-cost, highly-efficient services, but ones still designed by experts in their field. It might also mean that mega-deals between the big HR firms aren’t needed.
The future of people-related services may lie in people-less delivery.