Data Watch: Consulting by Numbers

Human Capital

HR Consulting Hangs Tough

While U.S. unemployment climbs slowly, and many consulting firms in many sectors, including IT, report sinking revenues, many HR consulting firms have reported revenue growth rates exceeding 9 percent for 2000 to 2001. Kennedy Information Research Group, which surveyed more than 1,000 human resource consulting firms for its latest "The Human Capital Market — Implications for HR Consultants" report, predicts that the $6.7 billion U.S. human resources consulting market will grow at a compound annual growth rate of 9.5 percent between 2000 and 2004. Business performance in many of the leading HR consulting firms is solid largely due to:

• Stable, ongoing benefits and actuarial work

• Long-term outsourcing contracts

• Business from outside the U.S.

• Strong demand for cost-saving HR technology solutions

Compensation

Mixed News for Pay Consultants

KIRG anticipates that the estimated 6 percent growth rate for pay consulting in 2000 and 2001 will drop to 5 percent growth from 2001 to 2002, and then rise to 7 percent growth for 2003 and 2004. A prolonged economic downturn or recession would decrease this estimate by 40 percent.

Some areas within pay consulting are more apt to grow than others. Three areas that may grow more rapidly include variable pay (short- and long-term incentives for positions, not just executives); executive compensation; and compensation for sales forces. However, base salary administration and management does not appear to be growing as quickly.

HR Technology

Differentiation is Critical for Survival

New entrants into the HR technology space will have to have a very clear value proposition and well-defined differentiation strategy if they want to survive, advises KIRG. Those firms that emerge from the start-up phase will be stronger than in their past, learning from their tribulations, and in better shape to pursue leading market positions in an as-yet-undefined market.