Geo Focus: Tough Sledding

Canadan Dollar It’s been a rough few years for those consultants in the Great White North. Is it finally turning around?

By Jess Scheer

As Canada’s economy improves in 2010, so too should the approximately $9 billion consulting market, according to a new report by the Canadian Association of Management Consultants. But there are a number of challenges consultants will face before they regain confidence.

Any growth would be very welcomed after two very challenging years. “As an example, “Ontario has historically won a disproportionately large share of the country’s car manufacturing contracts because of the fixed healthcare costs. Now, it’s feeling more than its share of the pain. Ford has confirmed it will close an entire plant and is consolidating offices. Plants in Windsor can’t even find buyers for their equipment as they close their shops,” says Glenn Yonemitsu, CEO of CMC-Canada, And because Ontario is a huge driver of the country’s GDP, as goes Ontario, so goes the rest of the economy, says Yonemitsu, who has also been a management consultant in Canada for 15 years, currently serving as President of Next Strategic Advisors.

The worst may be over for Ontario. Just over half (52 percent) of consultants expect consulting demand there to be stronger in 2010 than in 2009, according to a survey conducted in the summer by CMC-Canada of 2009 of more than 400 consultants across 346 firms. The bad news is that it is the only Canadian region in which the majority of consultants expect stronger demand.

Overall, the majority (55 percent) of those consultants working for firms with at least 100 professionals expected to grow somewhat in 2009. The majority of consultants at smaller firms expect, at best, no growth in 2009.

Looking ahead to 2010, most (63 percent) of consultants from these larger firms anticipate consulting demand will become stronger. Canadian consultants at smaller firms are less optimistic, according to the association’s research.

Weak demand for consulting work has only been part of the problem. More than 80 percent of consultants working for firms with at least 100 professional acknowledge some discounting of their rates in 2009. And more than three out of four consultants said their average discount was at least 10 percent below their standard rate. While an increase in overall demand should help limit discounting, Canadian consultants have an uphill climb to get fees back to pre-downturn levels.

Any uptick in consulting demand will also be tempered by two opposing trends, Yonemitsu says. “There has been so much restructuring across general industries that most companies are pretty lean right now. They need consultants. They are pared to the bone, from senior levels all the way through the bottom. And they need outside support to formulate and implement new strategies and make operational/tactical changes.

However, every time there’s some optimism, it’s balanced with realism. There’s a whole new element of the workforce that retired early or are out of work. And we expect there will be an influx of people hanging up their shingles as consultants who would otherwise be executives in industry,” he says.

His association is on the front line of this movement of industry veterans turned consultants. “There’s a whole flow of people coming in who are industry experts. Are they a force to be reckoned with? Absolutely. They have contacts and relationships that have built up over the years. Traditional consultants have a whole new group of people that are competing for consulting spend,” Yonemitsu says. When his association reached out to this emerging demographic last year, it “led to the largest increase in members in our history.”

The general mood among consultants is still quite cautious. “There’s a lot less certainty about 2010. People are unsure and are less confident in talk of a recovery,” Yonemitsu says.

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