The 2013 Executive Outlook

Things surely look better than they have in awhile, and there’s plenty to be optimistic about, but then again…

There’s simply no denying that the outlook for the year ahead is filled with signs of optimism. Then again, there’s simply no denying that there’s plenty of reason for caution and concern: mainly, we’ve been here before. Probably even more than once. Over the last several years, we’ve felt like we’ve turned the corner a few times, only to see another corner up ahead.

Who Took the Outlook Survey? So, will 2013 be any different? There’s reason to think that it will. Coming off perhaps an overly optimistic Executive Outlook of the last year—with 91 percent expecting revenue growth and 54 percent saying that growth would be in double digits—we have what appear to be more conservative and realistic expectations of 2013.

For the 2013 Executive Outlook survey, we again asked firm leaders about their businesses, including revenue, profits, opportunities and challenges ahead. Consulting surveyed 251 Managing Directors, Partners and Vice Presidents in October and November of 2012.

Bar Graphs First, let’s compare last year’s projections with this year’s reality. For the year that just ended, 75 percent of executives said they actually experienced growth, not quite the 91 that predicted it. And 39 percent said that growth was more than 10 percent. Again, that number falls short of the 54 percent who predicted it last year.

As for forecasting 2013, the numbers are positive, for sure, but not the over-the-moon variety we saw this time last year. According to our survey, 80 percent of executives are predicting revenue growth for 2013 and 48 percent say that revenue growth will be in excess of 10 percent.

So, top-line growth is significant, but does the rebound make it all the way to bottom line? Some 65 percent of firm leaders reported improvements to their net profits in 2012. In 2013, 81 percent of firm leaders anticipate net profits will improve, while only 4 percent say net profits will be down. The other 15 percent reported anticipating no change in net profits.

As part of the survey, we also asked participants to rate how concerned they are about certain internal and external issues. There we saw some dramatic shifts year on year. For instance, pricing pressures and sales cycles were the biggest external issues this time around. Last year, business development and project size topped the list. Internally, the biggest concerns in 2013 are managing utilization rates, retention and staff morale. Last year, setting new strategic goals and resetting compensation expectations were top concerns. So, we’re seeing significant shifts in what’s keeping firm leaders up at night.

Meanwhile, when we interviewed firm leaders about the next 12 months and asked them to give us a pulse check on the profession, every one responded with optimism… and a good bit of caution thrown in. And who can blame them? There’s still an awful lot of uncertainly in the market.

But still, all in all, firm leaders are feeling pretty good about new prospects in the new year. Of course, some much needed economic stability (we hope) and a some additional revenue can have that effect. We begin the Outlook with an exclusive feature story with Bob Patton, Americas Vice Chair of Advisory Services for Ernst & Young. Patton sat down with Consulting in December 2012 to discuss the historic journey the firm has been on the last five years since re-establishing Advisory as a stand-alone business.

We also spoke to 14 other leaders from the top-notch firms across a wide spectrum of the consulting industry. The leaders we spoke with are predicting solid revenues in 2013 near or at double-digit growth. They are confident. They are bullish on the overall economy and the opportunities it presents for clients and consulting firms.

This special is our effort to bring some clarity and closure to a tumultuous year, while also setting the stage for what’s ahead this year. While we all long for a sense of calm and economic normalcy in 2013, that still doesn’t appear to be in the cards at this point. However, firm leaders seem more prepared for the unknown, and as a result, are better equipped to handle what lies ahead in the new year.

Cesare Mainardi • Booz & Company

This was a wait-and-see year as clients across the globe took stock of an uncertain environment. You had a presidential election in the United States, which affected the health care and financial markets in particular. There was the seemingly chronic Eurozone debt crisis, lingering geopolitical unrest in the Middle East, and open speculation about the future growth rate of China. Spending on certain types of consulting projects froze up, while we saw rapid take-up in other practice areas. It was a year of contradictions.

‘Unsettled’ is the New Normal
We’re seeing some pick-up in the wake of the U.S. Presidential election and in other markets as the future outlook becomes clearer, but the global economy is far from out of the woods. No sooner do we have resolution on the administration in Washington and deficit deiscussions loom. So this unsettled, anxious atmosphere may well be our new normal. And companies will need to take a fresh look at their markets and make some bold decisions on who they want to be.

Who You Are Defines Your Future
I believe we’re at a threshold juncture. For years, strategy was all about where to go and where to grow.