There is no doubt that this recession has been both brutal and prolonged for many consulting firms. And Thomas J. Waite, President and CEO of Waite Associates, should know. He's on the front line, advising the leadership teams of consulting firms on how to improve their market position. That's a difficult task, given that in today's environment revenues are declining, billable hours are falling, clients are slower in paying, and, as a result, partner incomes have dropped and scores of consultants and staff have been laid off. Consulting's One-on-One sat down with Waite to discuss why he thinks a recovery may be sooner than most think and what firms should do in the meantime.
Consulting: For consulting firms, what's the good news?
Waite: Some firms, of course, are already faring better than others. For example, those focused squarely on government work are weathering the storm fairly well. Others have been adept at capitalizing on new opportunities. According to Business Week , The Boston Consulting Group is getting paid $7 million from the government for its work on both GM and Chrysler. For the rest of the profession, there are positive signs that the worst of the downturn could be behind us. According to the Bureau of Economic Analysis, businesses have slashed production at a much faster rate than overall demand has dropped. When inventories come into better balance with sales, companies start ordering again, which sets the stage for growth.
Stocks have steadily climbed higher, cheered on by a sharp increase in consumer confidence. The Conference Board reported that its index of consumer confidence for May jumped to its highest reading since September. The Economic Cycle Research Institutes' Weekly Leading Index—which tracks future indicators for sales, jobs, income and output—has been rising every month since December. Better yet, the Institute is forecasting that an economic upturn is finally in sight. In 16 of the last 17 U.S. downturns, a climb like this was followed by a recovery in about four months.
Consulting: Do consulting firm leaders share your optimism?
Waite: In my conversations with the heads of management consulting firms, a few leaders are starting to look forward and think about how they can steal market share from their competitors. While this recession is the greatest challenge in decades, some firm leaders are starting to ask themselves if they're adequately prepared for the recovery. I often remind firm leaders that the number of companies moving up or down in industry rankings more than doubles during a recovery. Do you really think consulting firms are an exception?
Consulting: What specific things should firm leaders do to prepare for the recovery?
Waite: I think firm leaders should be asking themselves five key questions:
1. Have you really cleaned out all of your deadwood? Is that Chief Marketing Officer or Chief Business Development Officer producing a great return-on-investment? Are all of your highly compensated senior partners really pulling their weight? If not, now's the time to upgrade your talent for the market opportunity ahead.
2. Are you communicating like crazy? Are you maximizing your time to make calls and visits to clients, past clients and prospects? Are you religiously filling your calendar with client and prospect meetings, lunches, dinners, etc. simply to "check in?" Are you doing absolutely everything you can think of to be top-of-mind when they are ready to buy? Because soon they will be.
3. Are you keeping your best people — and keeping them happy? Instead of laying off consultants and staff, have you been using other options like across-the-board salary cuts and/or sabbaticals to keep your best people and be in a position to gain market share when demand returns? Are you taking this opportunity to help them publish, speak, meet with clients and prospects and improve their business development skills? Is your HR department ready and prepared to quickly resume hiring more high-quality consultants?
4. Have you dropped the ball on marketing? Are you sure your value proposition — as a firm and by individual practices — will be relevant when the recovery happens? Are you developing compelling intellectual capital for the upturn and prepared to distribute it efficiently? Are you cost-effectively continuing to build your brand? Do you have a recovery-focused marketing plan in place and ready to be rolled out?
5. Are you ready to ramp up your business development activities? Are you keeping your client and prospect databases up-to-date? Have you already selected a new or upgraded CRM system, if you will need one? Do you have the appropriate new sales/pitch packs ready for the recovery? Do you have a plan in place for hiring the very best business development managers if you use them?
Consulting: How quickly do you think the market will recover?
Waite: I think that's the wrong question. Whenever it happens, history shows that the prescient firms put together recovery plans in advance, execute them quickly, and end up being the winners in a post-recession marketplace.
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