The 2016 Executive Outlook

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The results of this year’s Executive Outlook survey, combined with exclusive interviews with 15 firm leaders, would indicate a very positive year lies ahead for the consulting industry. Of course, global unrest and the threat of inflation looming large could throw a wrench into—or even derail—what figures to be a very rosy year ahead for the profession.

Based on our interviews, consulting firm leaders feel as confident as they have in quite some time. There’s simply no denying they all feel good about the economy and their firms’ overall financial performance in 2015, and are especially bullish about the year ahead.

Several say they just concluded one of their best years ever and plenty used words like “optimistic,” “successful,” “momentum,” “extraordinary” and “double-digit growth.” Some firm leaders are even reporting growth north of 20 percent. Not too shabby. Gone is the mantra of “cautiously optimistic” that seemed to punctuate nearly all of previous years’ interviews. While no one is predicting economic euphoria, most would agree that the year ahead should be very, very healthy. The news is good.

Happy days may be here again, but they are measured. Economists are quick to point out that we are still stuck in a slow growth mode and the global economy will have to continue settling for growth in the 2 percent to 3 percent range.

And Europe and China’s economic troubles will continue to have a ripple effect. However, consulting firm leaders are seeing no indications of a slowdown as they continue to report that their pipeline remains very strong. If any sort of economic slowdown was coming, consulting firms would be among the first to notice it.

The ones we spoke to say that all leading indicators continue to point in the right direction. So despite a slow growth environment, for the consulting profession at least, it remains life in the fast lane.

These findings are more than backed up by our market research. Based on the results of our Executive Outlook survey, which measures what firm leaders are forecasting for 2016, the consulting profession feels very optimistic about where we are and where we’re heading. That’s the major takeaway of our annual survey, which asked firm leaders about their business over the last 12 months, as well as what they’re expecting in 2016.

The research was conducted in November and December with more than 100 Managing Directors, Partners and Vice Presidents.

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Consulting magazine asked consulting firm leaders about their businesses, including revenue and profits, as well as about opportunities and the challenges ahead. Comparing last year’s projections with this year’s reality is a good place to start. For the year that just ended, 91 percent of executives said they experienced real revenue growth, even higher than the 85 percent that predicted it in last year’s survey.

And 63 percent said that the growth was higher than 10 percent, a full eight percentage points higher than the 55 percent who had forecast double-digit growth for 2015. So, in reality, things were even better than what firm leaders had forecasted for 2015 at the end of 2014.

As for forecasting 2016, those numbers are also looking up. Case in point: 97 percent of executives are forecasting growth, and 90 percent are saying that growth will exceed 6 percent. In 2015 and 2014, those numbers were 89 percent and 77 percent, respectively. So, the forecasts and projections of top-line growth is significant, but does that growth make it to bottom line? According to our survey, it sure does.

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Some 75 percent of firm leaders reported improvements to their net profits in 2015. In 2016, a staggering 94 percent of firm leaders anticipate net profits will improve, while only 2 percent say they’ll be down this year. The other 4 percent say they anticipate no change in net profits. And 55 percent, up from 51 percent last year, say net profits will be up more than 10 percent in 2016.

As part of the survey, we asked participants to rate how concerned they are about certain internal and external issues. There, the survey showed even more positive signs as new client business development and client retention tops the list.

In previous years, pricing pressures and sales cycles were top of mind. Meanwhile, internally, the biggest concerns in 2016 are setting new strategic goals/direction, staff morale and voluntary retention. ■

Executive Q&As:

Tom Elsenbrook, Alvarez & Marsal

Karen Dahut, Booz Allen Hamilton

Dave Johnson, Bain & Company

Tom Reichert, The Boston Consulting Group

Steve Chapman, Carlisle & Gallagher Consulting Group

Jim Powers, Crowe Horwath

Janet Foutty, Deloitte Consulting

Norman Lonergan, EY

James Roth, Huron Consulting Group

Julie Howard, Navigant

Chuck Ritter, Point B

Joe Tarantino, Protiviti

Miles Everson, PwC

Theresa Bozzelli, Sapient

Kevin McCarty, West Monroe Partners